Whether youβve been trading for several months or several years, itβs essential to be reminded of the top trader mistakes β and how to avoid them. Like with lots of things, bad habits can develop quickly. Our highly experienced team at Alpari International works hard to steer you in the right direction and provide the support you need.
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The longer you have been trading, the more likely you are to have a well-defined plan. Knowing your exact entry and exit points, the amount of capital to invest and the maximum loss youβre willing to take is crucial. Straying from a strategy or not planning in the first place can risk poor decision-making and therefore bigger losses.
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Traders often impose their own expectations and predictions on the market. While we need to make a judgement to place a trade, there is no guaranteed method for isolating each move and profiting. And believing so will result in frustration and errors in judgment.
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Your risk tolerance is crucial to determine before making a trade. Some investors are able to manage volatility in the markets whereas others may require a more secure, regular income. If the trade offers very attractive returns, consider its risk profile and how much you could lose if things go wrong. Never invest more than you can afford.
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While leverage can boost returns for profitable trades, it can exacerbate losses on losing trades: a truly double-edged sword. Learning how to manage leverage comes with a deeper understanding of the market and more advanced tried-and-tested strategies.
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Successful investors are able to move on quickly if a trade is not working out, and take action to cap a loss. Itβs an easy mistake to start panicking over a loss and hold on to a losing position in the hope that the trade will eventually work out. However, a losing trade can tie up capital for a long period of time and result in mounting losses.
If you want to practise your trading strategies without taking any risks, open a demo account with Alpari International today.
