Trading and gambling are very much similar because the outcome from both is not predictable. It always depends a lot on your luck. However, this should not keep you away from trying your hand in both, at least not in trading.
What you can do otherwise is that you can find out ways by which you can minimize your losses and maximize your wins. Hence, the best way to achieve this in trading is by not committing certain mistakes. In other words, you can avert disastrous moves by identifying certain red lights in the game.
Here are 5 common mistakes that many traders, even the experienced ones commit. Watch out for these and avert trade losses.
When you begin trading, never try fancy or inconsistent strategies such as trading from OTM (Out-Of-The-Money) calls. Go for simpler and easier strategies that will help you earn money consistently.
Additionally, do not stick to one particular strategy in different trading environments just because you are comfortable with it. Trading strategies must be tweaked and altered from time to time based on the market conditions that you engage in.
Talk to any financial expert and they will all have one thing in common to say and that is to plan your exit strategy. It is necessary that you develop a definitive and clear exit plan before you even begin trading so as to ensure that you make the right calls at the right time.
Another common mistake that people tend to make, even the professionals, is that they delve into the past and let their emotions override their actions. One example is that traders tend to hurry and make a rash decision when they foresee a wrong move rather than trying to avert the loss. Another classic example is that traders tend to wait for long periods before they can buy back trade options. Hence, the key to success lies in thinking rationally and doing what is right at that particular moment.
Other less common mistakes include being unaware of trade options in cases of early trade assignments, not using the trade index options wisely in cases of neutral trades, and trying to extract the maximum even from the last penny before calling it quits. These are all moves that act against the common trading strategies that you will need to prevent in order to cut down on your losses.
Therefore, ensure to keep away from these common mistakes and rest assured you could minimize your trade losses.