Trading is now widely popular. With the advance of technology and also the ease of access to information online, more people are now starting to invest and trade. Trading is the action of buying and selling goods or services, where the profit obtained is the difference between the purchase price and the selling price. In the financial industry, trading refers to the activity of buying and selling securities assets in the form of or cryptocurrencies. Under the conventional trading systems, in order to make a profit, you should buy an asset when its value is low and sell it when its value is higher than the price you have purchased it for.
With the right techniques employed, trading can reap huge profits for the traders. As a result, many people are increasingly interested in trading in the hope of earning more income. Many jump right into trading without learning the right techniques first and they end up suffering from huge losses. However, these losses can be minimized with good preparation. If you are really interested to become a successful trader, there are a few beginner trader mistakes that you need to avoid.
Beginner Trader Mistakes
To become an expert in trading, you need to have the experience of understanding and reading the market. It is normal to make mistakes during the start, but there are some basic mistakes that can be avoided. Here are some of the mistakes that beginner traders can avoid:
- Not Performing Technical and Fundamental Analysis
For some beginners, they start trading under the assumption that trading is based on speculation and sheer luck. However, speculation without deep analysis is the same as gambling. On the other hand, if you do the right trading analysis, you are able to avoid big losses. To become a proficient trader, you need to do the technical and fundamental analysis first to understand market patterns so that you can choose the right position to trade.
Technical analysis can be done in many ways, one of which is the candlestick analysis, support and resistance lines. For fundamental analysis, you can do it by reading news articles related to regulations and events that affect the attitudes of buyers and sellers in the market. For example, when China banned Bitcoin Mining, many bitcoin users panicked, which resulted in the price of Bitcoin dropping drastically or when Elon Musk announced that Tesla was investing in Bitcoin, the demand for Bitcoin increased, so the price rose significantly. From these news and events, you can identify the potential reaction of investors, which allows you to make a more precise and accurate decision.
- Lack of Risk Management
In trading, you must understand the basics of trading risk management. Trading risk is the risk that you must take when determining the steps in trading, such as determining the amount of capital or the volume of transactions you make.This is something that is completely under your control and you will need to manage how much risk you can accept. For example, to mitigate trading risk, you can decide to not trade with a capital greater than the value you are ready to lose. If you are still a beginner, it would be advisable to start with a small capital first, then gradually increase your trading threshold together when you are more experienced.
For example, you decide to trade crypto which has high volatility, so you are aware that the risk of trading crypto is high. Therefore, it is best to ensure you are financially stable first before trading. Always only trade funds you can afford to lose. You can also learn more about risk management in trading through reading books, and discussions with experienced trading mentors. By having good risk management, you can lower the possibility of big losses and can also be more strategic in determining your trading moves.
- Forgetting to set Stops and Limits
This mistake is usually made by traders who are used to conventional trading such as trading stocks. Unlike conventional trading which has opening and closing hours, the crypto market continues to run 24/7. Additionally, crypto prices fluctuate faster than conventional assets like stocks. If you miss the moment, you can incur a huge loss. To avoid this, just remember to set Stops and Limits, so that even when you are offline, the requested order can be executed according to the predetermined profit and loss limits.
- Not building a strong trading psychology
When trading for the first time, there are many emotions that a beginner trader goes through such as the fear of losing or being too eager to earn profits which results in making unwise trading decisions. Don’t let these emotions influence your trading analysis and cause you to make the wrong decisions.
Before trading, you must have a trading plan for the long term. The trading plan must include how much losses are ready to accept. Once that is done, all you need to do is stick to the trading plan and do not deviate from the original plan because of your emotions. If your emotions are out of control, calm down and stay away from the trading screen until your mind is clear again before reviewing your trading plan.
- Not Practicing on Demo Account
This mistake is one of the most serious mistakes a beginner can make. The reason is because the more you practice, the more experienced you will be in making decisions when you trade on the live account. On trading platforms like TokenomyX, you are given access to a demo account where you can practice trading with virtual funds, which is also provided free of charge. The purpose of the TokenomyX demo account is to allow users to practice their trading skills. The virtual funds provided are also unlimited for users to practice as many times as they would like.
Interested in practicing trading on Tokenomy? You can do so just by registering and verifying your account. Once you do so, you will be able to use the demo account to immediately practice your trading skills. What are you waiting for? Let’s start practicing trading on the TokenomyX platform!