Investing is a high-risk, high reward strategy. Though the main goal is to achieve gains, many other factors include timing, market volatility, and diversification. However, from a trading perspective, the risks are more straightforward – you can lose everything. Thus, it is worth taking note of the mistakes that novice traders make as they learn to trade.
We are sharing five reasons why some traders are having difficulties in trading. You will be able to identify those weaknesses and address them.
1) No clear idea on what you are trading
As a beginner, you don’t know what you are trading. So, your mind often bounces from trading to trading. Trading is not rocket science. You need to understand your business and strategy, focus, and not be disturbed by trading. You should not be distracted.
2) Bad timing and poor analysis
You don’t have a proper strategy when it comes to trading. You don’t study and analyze market trends or short-term events well. Some people are trading way too much, as if they have something important to do or just having fun. This doesn’t seem right. You need to analyze.
3) You don’t know your risk tolerance
You don’t know your risk tolerance, which is why you aren’t able to manage your trades well. So, you lose big because you bought to sell at a low price. You are risking your capital in a trading account, and you have to find ways of saving your money, such as trading through margin. You can find the amount you can put as a margin and save money.
4) Lack of understanding of complex Forex terms
Forex traders use some complicated terms. As a beginner, you don’t understand them, and you can’t manage them. Forex is a complex market, so you don’t need to learn all the terms right from the beginning. There are professionals to handle the jargon, but beginners need to get started by learning a basic level of these complex terms. However, sa forex brokers are best for beginners. You can read more about top 8 forex brokers in south africa
5) The trading volume is too low
Even if you have sufficient capital, you need to manage it with other people. Not all traders are earning from trading. If your trading account is receiving no action, you need to decide what to do next and take action. When you have established your trading system, the forex market will react to your strategy, and trade volume will increase, which you can manage.
When new to trading, you often feel that your momentum is good. You think you have made it when you are at the maximum profit. So, you take the profit and never stop trading. You see no sign of weakening, so you want to keep going.
In practice, this is not a good idea because you are just wasting money. Don’t be afraid to take profit. This is also one of the difficult things for beginners to accept. But, if you find a trade is not working, you can take profit and start your next trade. You may even trade in the margin.