There are a lot of guides out there detailing different ways to trade, different strategies, the risk management to use, and all sorts of information It is all well and good knowing what to do, but they very rarely go into detail on the things that you are not meant to be doing, so that is what we are going to be looking at today.
Before we take a look at the things that we should not be doing, let’s get a very brief overview of the things that we should be doing, these are things that you will hear all over the internet, from educational websites to Twitter, things people say you should do, we will point out that we actually agree with most of them and ensuring that you do them will help you to remain profitable and successful. Things like keeping a trading journal, very important to seeing how you are trading, using proper risk management, stop losses, take profits, and proper risk to reward ratio. Having enough capital, finding the right broker for you, getting a proper education, and more, all of these things can help you to be a successful trader and they are things that you should be doing.
So now let’s take a look at some of the things that you probably shouldn’t be doing as a trader…
Using Too Much Capital
The popular saying goes that you should only use what you can afford to lose, well that is very true, so it is a little bit of a mystery as to why so many people seem to trade with money that they cannot afford. We say it’s a mystery, it’s really not, it is simple greed, the want for more. We have seen hundreds if not thousands of people posting that they have lost all their savings or that they borrowed money to trade with and are now in debt. It is far too common and those people unfortunately very rarely learn, and are often repeat offenders. If you have lost money to need, do not put more in, it’s really that simple, yet quite hard for some people to understand. So the moral of the story is a simple one, do not trade what you can’t afford to use, see, tell you that was the popular thing to say.
There is no harm in a little gamble, unless you are doing it on the forex markets, if you were to bet on football or whatever your favourite sport is then you have a finite amount that you can lose with each bet, you will only lose what you have bet. It is not quite the same with trading, a single gamble could cost you $10, or it could cost you your entire balance. Gambling and trading just do not go well together. There is no skill in it, you are not analysing the markets and working out the best probability, you are simply putting on a trade that you think or sometimes just blindly think will go one way. When it doesn’t, what do you think the next course of action will be? Well, it isn’t to walk away, nop, instead people will simply put on another trade, an even larger one, with potentially even worse results. So if you get the urge to gamble, take it to the sport betting sites and not the forex markets.
Trading to Repay Debts
When people are in debt they can do desperate things, one of those things is to trade in order to try and make enough money to pay off their debts. When money and desperation are your primary motivators for trading then you will most likely be letting greed take over you. You will make trades that you probably shouldn’t be making or trading larger trade sizes than you should be. Either way, if those are your motivations then you probably should be steering clear of trading.
Trading to Make a Living
This is actually an end goal for a lot of people which is fine, it’s a good goal to aim for, the problems that a lot of people will aim to do right from the start, this is a recipe for disaster. To be able to get rid of your job and to trade full time is a lot of effort, an incredible amount and you need to have a lot of experience in order to do it, it certainly is not something that you are able to do without a lot of education and time. Before you even think about going full time you need to be able to make more than you are making with your job, as a part-time trader. So it is a lot harder than you may think. Trading is a very up and down volatile market, you won’t always make enough to sustain your monthly expenditure, other months you will make more than enough, so ensure that you have backup funds and also make enough on average to sustain your life and to make more than you currently do with your job.
Choosing a Random Broker
All brokers are pretty much the same, they all allow you to trade on the markets, so it doesn’t really matter which one you chose right? Wrong! Each and every broker is unique, there are of course some which are simple clones of others, but these clones differ from all other brokers that are out there. Different features, trading platforms, spreads, commissions, execution methods, customer services, bonuses, and more, every single aspect of a broker can be different, not to mention that there are a lot of brokers that have been set up for the sole purpose of skimming and taking peoples money.
So instead of going for just a random one, you need to look for the one that suits your own needs. We would suggest avoiding market maker brokers, these are brokers that have their own markets and trade against their clients so they have an interest in your losing, instead, go for a commission-based one. The more money you make, the more successful you are, and they have an interest in your success. You also need to ensure that they have the assets and pairs that you want to trade, that the trading platform matches what you need, if you have an MT4 trading robot, you will of course need a broker that offers MT4 as a trading platform. Some brokers offer bonuses, but we would avoid them due to the high trading volumes needed to actually withdraw any of the bonus as money. Look for reviews from your peers, often website reviews are affiliated but if you can find independent ones then that would be a good source of information on the broker. Ultimately, look for some that suit you and do not just simply sign up for the first one that you see.
Using Your Emotions to Trade
Emotions are powerful things and they can have a powerful effect on your trading, as soon as you allow your emotions to dictate your trading you will be heading towards a disaster. Emotions like greed, overconfidence, and impatience are some of the worst emotions and feelings to have when trading. All of them lead to you making trades that go against your trading plans, your risk management, and often trades that have very little analysis behind them. If you feel these emotions coming, do not trade, instead, take a break, step away from your trading terminal, get some fresh air, and then come back with a clear mind. Just ensure that you are not trading when your emotions are running high.
So those are some of the things that you should not be doing when you trade, the sad fact is that a lot of brokers have been created for the single intent to steal peoples money, so you need to be careful, there are also a lot of different pitfalls that you can fall into, many of which are classed as bad habits, you need to learn, take your time, do some research and stay disciplined if you want to be a successful trader.