Click Here for Post Two of 'What Trading Really Is Series'
One of the biggest mistakes a trader can make is to over trade their account. They can trade
too much of their account or have two much on one trade. The more a trader puts on one trade
the more emotional energy they use. Eventually they could blow up their account and have to
start all over again.
Most beginning traders will over trade their accounts trying to get rich quickly. Not taking
time to learn why they have made or lost on their trades. They just throw money at the market
and watch what happens, for good or for bad. Experienced traders know better than to put all in.
They will plan their trades, implement their plans and grow their account gradually.
If you are a day trader and put in too much of your account on any one trade you can clean out
your account quickly. There are two schools of thought about day trading. One is put large
number of lots on each trade and go for just a few pips. Two put a small percentage of your
account on any one trade and manage your wins and losses. The latter traders are the day
traders that will be around for a while. The aggressive day traders come and go being
successful for a time then losing their accounts quickly.
One of the worst things in the beginning is to have a new trader with to little money and no
experience or a trader with a lot of money and no experience. They will loose their account
quickly and not even know what happened.
Many times inexperienced traders start out with a lot of confidence and little or no experience.
A move takes off and looks like a sure thing, the problem with sure-thing trades is that:
1. The market has a mind of its own and the trader gets lucky once in a while.
2. Most traders see the market the same way when it starts to move go for it, (chasing
the trade) with out proper management or judgment they jump in to late and hang on to long for
big losses. So they’re over confidence and over trading will cost them in their emotional and
financial accounts.
We suggest to start out with a small amount on a trade, once the trades is confirmed that it is
moving in a solid trend then add on to the trade. This way you risk the least amount on the trade
when it is most risky and risk more when it is less risky.