8 mistakes that lead to losses in trading!

In the investment market, even if you are aware of the fatal mistakes, you can still fall prey to them. Don't underestimate the reality that many people continue to repeat these mistakes even today. Do you think you can escape them？ Losing money in the investment market is incredibly easy, while making money is difficult. To become a skilled profit-maker, one must dedicate themselves to studying effective strategies and consistently applying them in the long term.

Today, let's discuss the 8 common reasons why most people experience losses. Take a close look at your own trading behaviors and face them head-on, as this is the path to achieving profitability.

Failure to cut losses when holding positions

This is one of the most disastrous mistakes a trader can make. It is a trap that ensnares both beginners and seasoned traders, including even some experts. This approach thrives and claims numerous victims because the process of holding onto losing positions is filled with hope and expectation. When closing the position, not only does one lose money, but they also admit their mistake, succumbing to despair and experiencing a massive blow to their confidence.

Beginners can withstand floating losses primarily due to their ignorance and fearlessness, unaware of the brutal consequences of this mistake. They are unknowingly taken out of the market. On the other hand, experienced traders often fall victim to this mistake due to excessive self-confidence. After years of trading experience, they become accustomed to life and death situations, failing to realize that history does not simply repeat itself. If you are too comfortable with life and death, it will come back to haunt you. Ironically, it is often the experienced traders who suffer the most during “black swan” events.

Adding to positions against the trend

Speculative trading is indeed a game that can amplify a trader's greed. Adding to positions against the trend is one of the most damaging and frequently leading to margin calls. There is no doubt about it. For instance, if a trader holds a long position during a downtrend and decides to add another position, the losses incurred will be doubled. The capital depletes faster, and the risk of margin call increases.

Certainly, if the market retraces after adding to the position, the trader may recover quickly. However, this only fuels the trader's sense of luck, leading to even heavier positions. It's like blowing up a balloon relentlessly until it inevitably bursts. The ultimate result is losing several years of hard work in a single night. This refers to the trades where adding to positions against the trend eventually leads to a margin call.

Excessive trading

There are many drawbacks to frequent trading. It can be exhausting, and over time, it drains both physical and mental energy, making traders more prone to impulsive and erroneous decisions. The primary reason why most people struggle to control their urge to trade excessively is the lack of clear trading rules. Alternatively, even if they have trading rules, these rules may be vague or insufficiently detailed. As a result, many opportunities, which may or may not be actual trading opportunities, are perceived as such amidst price fluctuations and the emotional nature of individuals.

Too many trading instruments

Forex trading platforms offer a wide range of trading instruments, with dozens of currency pairs available. Each instrument has its own fundamental factors and unique price movements. Many novice traders make the mistake of wanting to trade every instrument, chasing after price movements and trying to catch every uptrend or downtrend.

In reality, each trading instrument has its own characteristics and trend patterns. Trying to trade every instrument without a deep understanding of each one leads to poor trading performance and ultimately results in losses. It's important to focus on a select few instruments and develop expertise in trading them rather than spreading oneself too thin across multiple instruments.

Excessive Indicator Switching

Let me ask you a question: How many indicators do you understand？

According to incomplete online data, over 80% of traders have studied more than 10 indicators. Why do we learn so many indicators？ It's because most people have misconceptions about indicators. We hope that indicators can predict market trends, help us make profits without losses, and lead us to financial freedom.

After learning and using these indicators, we find that their performance is inconsistent. Sometimes they bring profits, and other times they result in losses. So, we keep learning and using them, but the losses continue, leading us to switch to different indicators. Every time we switch indicators, we feel like victory is within reach, but after a while, we start losing again.

Emotional Trading

Every candlestick on the chart has its own smiley face or frown, but the market remains the same – either rising or falling. However, the process of holding positions reveals a common pattern among traders. Take a look at those panicking individuals who constantly switch their views, sometimes seeing an uptrend and other times anticipating a downtrend. They engage in constant self-suggestion. Despite holding a short position, they keep thinking about what will happen after an uptrend. This behavior doesn't indicate foresight; it merely reflects a lack of trust in their own trading decisions, leading to panic.

Continuing in this manner, traders end up hastily closing their positions in anxiety and fear, forgetting their trading plans. They remain trapped in the sense of defeat caused by trading losses for several days afterward, unable to break free from this cycle.

Guessing Market Movements

There are always individuals who enjoy trying to predict where the market will rise to or fall to in advance. While forecasting is necessary, practical traders understand that the key lies in not blindly believing in those predictions. These overconfident traders repeatedly follow their own predictions, reinforcing their beliefs. When their orders are profitable, they rely on their intuition to set a take-profit level. When their orders are losing, they hastily determine a stop-loss level. They enter trades based on gut feelings and exit based on emotions. This behavior is no different from gambling.

Inability to Hold on to Profits

You identify a promising market opportunity, enter your order, and as soon as the market starts moving in your favor, you close the position prematurely. Regardless of how confident you were in the market when you entered the trade, regardless of the psychological preparation you did beforehand, that act of closing the position feels like someone else's hand, as if it doesn't obey your commands. There is only one reason for this: fear of losses. You have become a timid participant in the market, and closing positions has become an instinctive response driven by fear.

There are two possible outcomes in a normal trade: stop loss and take profit. If you only have stop losses and no take profits, the possibility of making profits has completely disappeared, leaving only losses.

Trading is a task that requires focus and concentration. It requires deep learning and thoughtful analysis, continuous practice, and the development of one's mindset in order to succeed.