ZoneBitcoin EditorialIn the majority of areas, the mistakes you make will allow you to learn lessons and then move forward. Trading is no exception to this rule, and sometimes bad decisions are inevitable. However, they should not be repeated at the risk of generating significant losses. In the long term, you risk being ruined by not having learned from these different situations.
Here are 4 trading mistakes to avoid so as not to fail.
1. Doing bad market analysis
In your quest for everything you need to know about trading, it is very important to be properly trained to limit the risks. One of the most common mistakes made is poor market analysis. It is not uncommon for some traders to rely on intuition or third-party advice to:
- Open ;
- Closing positions.
In some cases, such a strategy may pay off. However, it is strongly discouraged to rely on this method. Any investment should be made based on research done on the market. So you need concrete and solid evidence to decide on a position.
2. Being totally dependent on software
In one case like this one, professionals generally use software to succeed in their trades. These tools make it possible to automate positions and meet the needs of traders. The main advantage of these tools is that they allow transactions to be carried out more quickly. Compared to traders who do everything manually, you will have a big head start. However, also be aware that these tools have their downsides.
Their behavior depends entirely on predefined parameters. They therefore cannot adapt to certain situations that were not anticipated. This is why you should not completely rely on these trading software.
3. Playing the diversification card too early
All experienced traders know that it is very important to diversify your portfolio. This will provide you with some protection in the event of a drop in the value of one of the assets. Further, avoid opening multiple positions in a very short window. Do not let yourself be seduced by the lure of gain, because this will only lead you to certain loss. Additionally, diversifying too early requires more effort to manage everything. You will only increase the risk of losing a large part of your capital.
The best way to do this is to stay abreast of trends and events that may impact the markets. You will thus avoid multiplying the risks incurred with the diversification of your portfolio. Furthermore, the diversification strategy should be avoided if you are a beginner trader.
4. Underestimating the power of leverage
In some cases, opening a position is virtually impossible without using leverage. The latter involves borrowing money from a broker to achieve your goal. What is the principle in concrete terms? You hedge by depositing money, in exchange for proportional exposure to the market. The latter is equivalent to the overall amount of the position. Although leverage can boost your winnings, this rule also applies to losses.
So know how to use leverage to trade very sparingly. Otherwise, the resulting losses are likely to be heavy.
