Show me an old and seasoned trader that never burnt their fingers; and I will show you a unicorn hatching from an eggshell. The newbie trader dilemma makes it such that no one goes through the trading beginner phase without getting whipped(by losses) at some point. In fact, it is a trader experiences throughout his/her trading life -cycle; you just learn to manage the risks better.
The market is characterized by traps. It is a norm that the market takes everyone unawares at a given point in time. However, there are some habits that traders, especially the new ones, are prone to that will often hinder profitable trading.
Some of these are what I term “the newbie trader dilemma.”
- TECHNICAL KNOW-HOW? – Sounds pretty mundane right, like something out of a basic econ textbook? Well, it is what it is. Most traders do not really know how to use their trading platform. How do you make the best of something if you do not understand its workings? They are ignorant on how to use certain functions to their benefit. This single reason is a hindrance to pulling up an effecient trade that could yield maximum profits and foster minimal losses.
- NO FUNCTIONAL SYSTEM- Most new traders do not use rule based systems and strategies when trading. These systems are there to keep traders safe. However, you find that, once the seduction of making money hits, most newbie traders will usually throw risk management systems to the curb. Not having a trading system in place that you subject yourself to follow, will more likely lead to heavy losses than gains.
- TRIVIALIZING TRADING JOURNALS – A trading journal is a catalogue that should hold all trade executions and reflect the reasons the trader has taken a position. Without it, traders cannot have an indept data or reports on their trading trading performance. Such a trader has the disadvange of being unable to benefit from past mistakes and successes alike.
- TRY MY LUCK MENTALITY – In this category, traders have no clear understanding of what drives the market or price action. It is a gamble for most or some sort of game. It is usually a case of luck when such a trader would make a killing on a successful trade. Also, they are unable to understand and learn from losing trades because; they do not even understand what is happening in the first place.
In the end, what is worth doing, is worth doing well especially, when it involves finances. Why risk your money when it can easily be avoidable? In trading, when you do your due dilligence, you will reap your dues.