Is there a tool,
indicator, or trading strategy that is 100 percent accurate? Exists a finance
or economics program that teaches students how to trade profitably? The answer
is simple and unambiguous: No.
It all comes down
to making the right choice at the appropriate time in terms of timing and price
direction when trading the markets. However, there are resources and methods
that might assist novice traders in "not losing the money," which
ought to be everyone's top priority. In order to avoid losing money in the
first year or two, you must determine your target before you start making
income.
You won't be able
to move on to your second goal, making money, until you succeed in doing that.
In order to learn from others' failures, stop asking yourself what professionals
do to make money and start asking what amateurs do instead.
I listed a few of
them below; An account closure can result from traders making step-by-step
mistakes.
1 ACCOUNT SIZE
The money in your
account is the first area of concern. 90% of traders, in my opinion, are losing
money, not because they lack trading skills but rather because their trading
accounts are too tiny, despite the fact that they want to generate big gains to
pay for their living expenses. Many brokers are running promotions where they
will open a trade account for 500 EUR or less. Brokers are aware that there are
many retail traders who have 500 euros in their pockets but few who have a
trading account with 20,000 euros.
The simple line is
that you need money if you want to trade. I'm done now!
To trade with
reasonable risk sizes, normal leverage, and permit acceptable draw-downs
without any hassles, in my opinion, even novice retail traders would require a
minimum of +20.000 EUR. Another factor that account size counts is EU regulation,
which regulates trading leverage.
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2 POSITION SIZE
We can therefore
understand the origin of "too big position size" if we take into
account the first problem mentioned above. They simply have modest accounts and
won't trade micro quantities to swing a few cents up and down, not because they
want to take on a lot of risk. So I can understand why risk on a small account
is more likely to be between 5 and 10% rather than 2% every deal.
Unfortunately, things might soon spiral out of control.
Consider this: It
seems reasonable if you risk $50 to $100 per trade on accounts with a $1,000
balance. Based on the amount of money, it doesn't appear too bad, so that makes
sense, but based on the %, it doesn't, and that's where traders fall short.
What would you risk on each trade if you have 100,000 EUR in your account?
Would it be between 5,000 and 10,000 EUR? I'm confident that you can say no
because your usual living expenses do not require you to earn such high
incomes.
3. NOT TERMINATING A BAD TRADE AND NOT EMPLOYING
STOPS
Let's say that the
novice trader did not make the first two errors. He has enough capital to
trade, therefore he is okay with putting just 1% of the account at risk. What
may be the next error that could spell disaster? I believe the issue is that
there is no suitable way to terminate a bad deal. A few trades that they failed
to stop when they should have ended their account, and things only became worse
for their account, are examples of folks I've encountered who were initially
generating excellent profits.
They were praying
and hoping that things would turn out in their favor so that they could at
least lessen the severe loss, but this rarely happens; things usually turn out
to be against you.
WHAT IS THE REMEDY?
Before you join a
trade, choose your risk exit point! You must acknowledge when you are mistaken!
And it's essential to leave a losing trade and move your money to a place where
you can see a solid structure. Why wait for another train if this one has
already left? Instead, look for a bus or taxi stand.
4. Retaliation trading
Did you go short,
get stopped out, and go short again when the market fell a little lower after
your initial position was closed? Or did you initiate a purchase trade when
your first transaction's stop was hit? And in the majority of cases, you were
likely again stopped out and lost much more than you had anticipated. Yes, it
is called a "revenge trading," and we have all experienced it.
Solution?
Simply avoid doing
it. Just like that. If you were stopped out, your transaction is over; walk
outdoors, take a step back, and relax. the following day, bring new concepts
and trading plans.
What about trading errors caused by a technical
strategy?
It's not simple to
be wise in this situation because there are many alternative ways to trade and
there isn't actually only one that may succeed. But here are some details that
could be useful: