Bad Trading Habits and How to Avoid Them

By | February 10, 2016 4:28 pm

When trading  you should maintain a businesslike attitude and take your investment seriously.

There are common bad habits that can prove severely detrimental to your trading account and every trader should do his or her best to completely avoid committing them.

1. Unreasonable Expectations

Most of you have heard stories of traders from  Rs 50000 and making millions in a fortnight then those were lies.Though it is possible to make a fortune from a small initial investment, this usually takes a lot of time as one gains knowledge and experience to grow the account.

During this learning period, be ready to suffer many losses. Some of them will be heavy enough to wipe out your trading account.

In short, do not quit your day job just yet. Take your time to learn the trade and expect reasonable profits especially in your first few months of trade.

2. Inexperience

Lack of knowledge and high expectations make many traders jump head first into live trading without first grasping the basic  of trading principles.They then end up paying a very high tuition fee in terms of losses to learn the market.

Your success depends on knowing the right kind of rules and following them. Lawyers, doctors, engineers and professional men who make a
success spend anywhere from two to five years time studying and preparing to practice their profession before making any money.

3 . No  Money Management

One of the worst mistakes any trader can make is forgetting to adopt practical money management strategies.They then get influenced by greed and keep chasing promising trades that more likely than not turn into big losers. At such a point, most traders will start treating their trading as a gambling game and as they say, a fool and his money are soon parted.

4. Holding Losing Positions Too Long

When you trade using your trading plan, it is highly likely that you will set a stop loss to protect your account from excess losses.

If one of your trades goes wrong, it is better to let it get stopped out rather than adjusting the stop loss in the hope that the price trend will reverse and the trade will turn into a profit for you. PSU bank are down between 10-20% in past 3 days so any trader not having effective money management could have faced big loss. Top traders are knowledgeable and experienced enough to know when to cut their losses and move on.


5. Over Leveraging

Trading on margin can earn you high profits in the market more than in any other market. This is because the high leverage levels offered in the trading market enable a trader to control high investment amounts and thus make high profits.However, the same high leverage is what can cause your undoing since a high leverage level exposes your account to higher risks that may potentially wipe you out.

6. Holding Too Many Open Positions

It is tempting sometimes to enter multiple trades, especially when a market is doing so well. Whenever you can, kill that temptation as it is a product of greed.It will make it difficult to manage your position and to contain any emergencies that may occur, especially during a trend  reversal.

7. Lack of a Sound Strategy

Every trader should have an overall plan on how they will enter, exit, and manage trades. Traders should also have a well defined plan for each trade before they enter into it. The plan should also define a realistic expected return for each trade.

Mistakes are a normal part of trading. Nevertheless, every trader should take steps to minimize their mistakes.These dangerous trading habits featured above can be remedied by simple planning and adequate preparation.

2 thoughts on “Bad Trading Habits and How to Avoid Them

  1. gaurav

    One more mistake new traders commit is they do not fix their time frames. If trading in hourly time frame, use 3 hourly as a guide but the trading rules should strictly follow the hourly frame.


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