Bad Trading Habits That Make You Fail

If you are just starting out in the world of trading, then one of the most important things that you need to do is to develop good trading habits. The fact of the matter is that even if you know how to trade and you are familiar with charts, indicators and all of that other fancy stuff, if you have bad trading habits, you just aren’t going to make any money.

Sure, knowing all of the intricacies of trading such as one oscillator does is of course very important. But with that being said, if you have bad trading habits, it’s not going to make any difference how much you know. With that being said, developing good trading habits is certainly a part of knowing how to trade properly.

The bottom line here is that newbie traders and even novices make a whole lot of bad trading mistakes based on bad trading habits. These are trading habits that people develop early on in their trading career and more often than not, they are extremely hard to get rid of once you develop bad habits. Doing things the right way becomes extremely difficult. Therefore, what we’re here to do today is to talk about the biggest bad trading habits that make you fail the trading habits that you need to avoid developing.

bad trading habits

Chasing Markets

One of the biggest bad trading habits that all too many newbies develop is that they end up chasing markets. What we mean by chasing markets is placing a trade on a trend that has already been going on for a very long time and appears to be nearing its highs. The issue is that newbie traders think that trend somehow never end and then they will just keep going.

The problem here is of course that trends do end and they reverse. If you end up chasing markets and placing trades late into a trend in the hopes that the trend will just keep on continuing upwards, then you are going to be in for a serious surprise. Eventually, that trend is going to reverse.

Therefore, placing a trade when a market trend already appears to be near its highs in the hopes of making more money is a big mistake. Instead, the better approach here is to wait for a reversal and then to place a short trade to benefit from that pullback or reversal.

Trading Mistakes

Using the Same Position Sizes

Another one of the worst trading habits that newbies tend to develop is that they never change their position sizes. Sure, paying attention to indicators and charts and choosing how long your trades should be open for all very important factors. But with that being said, all too many people forget to adjust their position sizes, especially in relation to their stock losses. When traders see a good opportunity, they’ll often just enter right into a trade without changing their position sizes, and this is a big problem.

The issue here is that if you don’t change your position sizes, especially based on your stop loss levels, then your wins and losses are going to be extremely erratic and very difficult to predict. One thing that you don’t want in trading is a lack of predictability. The better you can predict the outcome of a trade, obviously the better things are going to go. You need to tighten your stock losses when you have large positions so you don’t have to risk all that much money.

Going All In

One of the worst trading habits that newbies off the develop is that when they see a profitable opportunity, they will invest all of their money or the majority of their money into a single trade. Folks, this is of course a really bad thing.

 If you have ever heard the saying don’t put all of your eggs in the same basket. This is exactly what it applies to. The keyword to focus on here is diversification. Diversification is a key trading market concept that every profitable trader knows all too well.

The fact of the matter is that if you invest all of your money into a single trade, and that trade goes South, then you lose all of your money. The recommendation that most profitable traders will provide you with Is that you should invest no more than two percent of your total capital into a single trade. This way, even if a trade does go South, you don’t end up losing all that much money.

bad trading habits

Hesitating to Cut Losses

When it comes to bad trading habits, one of the worst ones that you could possibly develop is to hesitate to cut your losses. Ultimately, newbies will stick with losing positions in the hopes that things will eventually turn around, and that profits will occur.

However, this really doesn’t make any sense, because if you are already in a losing position, then not only do you need the trade to turn around for you to make a profit, but you first need to break even, and that’s much easier said than done.

People, if you are in a losing position, especially if it goes past your stop loss and you absolutely need to close your trade, there is no point in sticking with a losing position. You are doing nothing but taking a massive chance. If you have a losing position, the best thing to do is to close it right away and to open a new position. Risking your money on a losing trade is simply not worth it.

bad trading habits

Relying on Unreliable Sources

The last of the bad trading habits that we want to talk about quickly is that newbies will often go to unreliable sources for trading information simply because they don’t know what they are doing. Ultimately, people will go to random trading forums and to social media to get information and advice on trading. Folks, anybody and everybody can post on social media and forums.

You have absolutely no guarantee that these people have any clue what they’re talking about. You don’t want to risk your money based on information that some nobody told you about on social media. Any trade you place should be based solely on your own market research and analysis.

Bad Trading Habits to Avoid – The Bottom Line

The bottom line here is that if you can avoid the bad trading habits that we discussed today, your chances of becoming a profitable trader increase drastically.

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