Trading and investing represent two of the best life-changing opportunities for anyone; no matter where they are located, no matter their circumstances. 2020 has devastated the world of work and the ‘old faithful’ careers. Everyone must now find ways of generating reliable, independent multiple streams of income which sustain their family and standard of living and which also build secure wealth. So, why is it that most new and inexperienced traders fail and give up so easily and quickly? To answer this, we need to understand the Top 3 common but seldom discussed novice trader mistakes. And, if you can avoid making these same errors, then you will eventually enjoy success in this amazing business.
No matter how you are approaching analysing the financial markets and the stock or instrument plays you have in mind; you need a bank of quality experience and skills to be consistently successful. Enduring fame is not won overnight.To be an accomplished trader and investor demands countless hours of learning, studying, and doing. There are no shortcuts. Experience will be amassed slowly when trades are executed in the live markets with real money. Afterwards, each trade must be assessed whether a winner or a loser:
- was my analysis correct?
- did I follow my rules?
- did I miss something in the preceding price action?
- did I manage the position correctly?
- did I maximise the profit target?
- did I place and adjust my stop loss correctly?
- was I too quick to take the trade?
- did I rush into the position instead of taking the time to assess very aspect?
- was I too conservative in my entry allowing fear to unsettle my approach?
Rather than having a structured approach to starting out as beginner trader and investor, he or she prioritises instant success, a bulging bank balance to the actual realities of the opportunity. For their world, time and perseverance are in short supply. Impatience grabs them forcefully and gets the better of them, pushing them from one unsuccessful strategy to another until the moment they quit. And the shame is that this fantastic opportunity is now a closed bad memory for them, never to be repeated.
Everything in life we first try is never easy –
it takes experience and skill to be successful!
- I can do it Myself
The world-wide web is awash with self-help articles, videos, and podcasts. Trading and investing are no exception with a veritable library of basic training and education waiting to be searched. The best of this visual and written material is a great starting point for anyone beginning their journey or for someone who is still uncertain whether trading and investing is ‘their thing’.
But donot set too high expectation about the effectiveness of this material in terms of outcome. Knowledge is one thing, success is another. Even if you devour all the free content – it is ‘free’ which sums up the likely impact it will have on your trading results. If this free information enjoyed impressive performance, it would be likely locked in an impenetrable vault or be on offer as a ‘big-ticket’ item.
This common-sense approach to knowledge acquisition does not phase the stubborn novice trader who is unshakable in his self-belief in being able to learn to trade and invest for himself – come what may. But he should ask himself whether a tradesman could train himself to carry out a complex surgical procedure after having read a series oftextbooks and having watcheda sequence of video recordings. Would you put your life in the hands of a knowledgeable novice? Of course not!
Why then do we so easily settle on running risks in the financial markets by attempting to learn to trade and invest ourselves.
The answer is that we are reluctant to pay for any training unless it is vital. An avid DIY enthusiast will attempt most projects and repairs around the home. But a failed heating system in the heart of Winter when temperatures are freezing means there is no choice but to pay a specialist to carry out the fix.
These two qualities – ‘I have no other choice’ and ‘no time cushion’ are missing when the beginner trader is making his training and education decisions. This is a flawed decision-making process because neither quality is superior to the answer to the real question: ‘Do I need expert help in learning to trade and invest?’.
Time is never a replacement for specialist training and education
- I Know Better
This is the hardest one for a beginner trader to accept. Normally, the route the novice has taken sculpts his mind and acceptance to the best way or method to use to trade. If he has experienced a plethora of training, whether paid or not, he may have built a dependency upon techniques or technical tools, studies, or indicators. This ‘crutch’ reliance will be difficult for him to let go as he regards it as his last line of defence to understanding the financial markets.
The reality is that most retail traders lose. And, they rely on all manner of support tools and trading strategies, meaning that continued reliance on this conventional approach makes no difference to the outcome.
Despite all this hard evidence, the beginner trader will not stop relying on these technical tools because they offer a certainty – a buy or sell signal that otherwise does not exist. While there is essentially nothing wrong with this, the indicator is no substitute for being able to read raw price action. The movement of value discloses everything about strength and weakness and is not biased specifically as is an indictor or tool.
These are three weakness strangling the development of the novice trader and investor. And they are not isolated; they know one another. The ’I know better attitude’ is a spin off from the ‘I can train and educate myself’. These are the barriers that prevent his development to being successful. In fact, when they are then coupled with impatience, the brew is a deadly mix; hence, the crippling statistics for retail trader success.
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What ‘big picture’ mistake do you suffer when trading and investing?