A common misconception is that trading is a get rich quick scheme. As ideal as that would be, unfortunately, it is not the case.
The most common mistake new traders make, is not taking their trading account seriously. As is in life, the more you put in, the more you get out, the same goes for Trading.
Lack of effort is often the downfall of many newcomers to trading.
Trading should be treated as any other career, with both preparation and education essential. Just as a University degree or an apprentice is required to train for certain career paths, it is equally as important to educate yourself well on the ins and outs of trading and what is required to become a successful trader.
Back-testingis another key component, often neglected, resulting in a failed account. In short, back-testing is basically analysing historical data of your own past trades entered. For this to work, you must be critically honest with yourself, to ensure the test is accurate. This allows you as the trader to determine whether or not the strategy used during that trade was effective or not. Allowing you to calculate your accuracy percentage in terms of successful and unsuccessful trades. Knowing your accuracy percentage allows the trader to determine your risk-reward rate.
Risk-RewardRate Example: Assume you have an accuracy rate of 30% successful trades with your current strategy. This means that for your trading account to be profitable, your winnings must be at least 3 times that of your stop losses. i.e. stop loss is at 100 pips, therefore, take profit at 300 pips.
Keep a trading journal. This is an absolutely crucial part of becoming a successful trader.
Keeping detailed, in-depth journal entries and records of each trade taken can be hugely advantages when back-testing as well as allowing you, the trader, to reflect on not only the signs the market gave that drove you to enter the trade, but to reflect on your emotional state when you entered the trade.
Which brings us to our final and perhaps most important point, emotions. Emotions are often the determining factor that makes or breaks a trader.
Fear is an extremely powerful emotion and can destroy the confidence of a trader. A streak of losses can strike fear into a trader and often results in traders doubting their strategy, even after hours and hours of trial and error perfecting and back-testing the strategy.
Similarly, an inflated ego can be just as detrimental to a trader. A nice winning streak more often than not results in overconfidence, especially when it comes to lesser experienced traders, which in turn leads to abandonment of strategy and taking trades that simply do not show the requirements needed for your strategy. The market will check an ego very quickly.
Therefore, withdrawing emotion from trading can be the best strategy to ensure your next trading account is a success. Cut your losses, review your strategy and move on. The same goes for successful trades, take your profits, celebrate, but then move on, ensuring to implement your strategy with every trade taken.
BlackBull Markets provides some excellent videos and guides on their website as well as on their YouTube channel:
Our team also provides round the clock clientele support team and are available for emotional support and guidance, ensuring a safe and effective trading experience.