New Trader's Common Mistakes Part 1

Why do most traders fail? Trading is about taking a step back and looking at the long term rather than what can be made in the next trade, the next hour or the next night. This series will examine some of the common mistakes made by new traders.

Lack of Education: The Paul Simon song from the 70's may have alluded to the fact that his “lack of education hasn’t hurt me none,” but lacking education in trading can hurt new traders. Without proper education, traders fail because they are gambling and not trading. Traders reward themselves for bad behavior, by continuing to trade without proper education.

Jumping Between Systems: Some traders experiment with one system for a time. It works, but when another one comes along that sounds better, the trader will jump on board with the new system. A trader who constantly jumps between systems becomes a jack-of-all-trades but a master of none, never fully understanding or mastering any of them. By jumping between systems, traders are all over the place, mixing up rules, confusing what should be watched for in which system, causing failure in trading.

Having a “Know it all” Attitude: A trader may already be a doctor, a business owner, have college degrees or be an expert in his field, but if the attitude of already knowing it all exists, the trader will likely fail. Traders must be teachable. A sure way to watch a personal trading account slowly dwindle down to nothing is to think like a know it all, or be unwilling to learn anything new, or to change with the times.

Letting Greed and Need Take Over: These two things cause trading to become sloppy. If trade's are made because money is needed, the smartest decisions won’t be made. Do not ever trade out of need and only trade with expendable funds. Greed can take over after a few winning trades, and the more you risk without doing proper due diligence, the more your trading will resemble gambling. 

Searching for the Holy Grail: New traders, and even seasoned traders, often search for the one system that will profit 100 percent of the time and never lose. There is no such thing! It is a lie if someone purports to never lose a trade. Companies may claim to have software that never loses. As a trader, it is important to realize that having losses is part of trading. Learn to manage the losses. Learn to read the market conditions. Have a good risk/reward ratio. Understand the basics of trading and actually learn how to trade.

More articles in this series will present additional mistakes made by new traders. As a trader learns what causes failure, more success in trading may be found as problem areas are eliminated.

Free education is available at www.apexinvesting.com.