7 Common Trading Mistakes Every Beginner Should Avoid

Taking your first steps as a beginner trader is not a smooth journey. Many beginners barely last a few weeks before blowing up their accounts. Without the right knowledge, your trading career might be over before it really begins.

Let me share the advice I wish I’d gotten when I was starting out. These tips will help you avoid the most common mistakes new traders face.

WARNING

Trading exposes you to the risk of losing more than your initial investment and incurring financial liability. Trading is suitable only for well-informed, sophisticated clients able to understand how the products being traded work and having the financial ability to bear the aforementioned risk.

Transactions involving foreign exchange instruments (FOREX) and contracts for difference (CFD) are highly speculative and extremely complex. As such, they are subject to a high level of risk due to leverage. Please keep in mind that CFD trading is banned in the US.

Information published on the NewTrading.io website is for informational purposes only and should not be construed as offering investment advice or as an enticement to trade financial instruments.

#1 Not Keeping Your Feet on the Ground

Trading is undoubtedly one of the most challenging activities, and it’s easy to be seduced by the dream of quick profits. 

However, the reality is much harsher. Official statistics reveal that nearly 90% of retail traders lose money; even among the remaining 10%, many are not earning significant profits.

Browsing through online forums like Reddit, you’ll find many posts from people who have either quit trading or are seriously considering it.

For example, some users discuss quitting after years of struggling without profitability, while others debate whether they should give up their day jobs to trade full-time. These discussions are filled with stories of disappointment and financial loss, emphasizing how many people enter trading with unrealistic expectations only to face harsh realities.

Outperforming the market over the long term is incredibly difficult—some would say it’s even harder than winning an Olympic medal!

Because of this, trading should never be seen as a sure way to fix financial problems or as a reliable source of extra income. At the start, it’s wise to think of trading as a leisure expense rather than an investment. Expecting to make money right away is unrealistic and can lead to disappointment.

#2 Obsessing Over Profits at the Expense of the Process

The ultimate goal of trading is to make money, but paradoxically, focusing on this objective is not the most effective way to achieve it.

In trading, outcomes can be influenced by both luck and misfortune. A single gain or loss provides only a rough indication of the quality of your decision-making. Instead of obsessing over each trade’s outcome, analyze both your successes and failures. What patterns can you identify? What lessons can you extract?

Remember, every trade involves uncertainty. A well-executed trade can still result in a loss, while a poorly planned one might accidentally lead to a gain.

Maintaining a trading journal allows you to step back and objectively analyze your trading operations. You can use it to refine your strategy and trading routine over time.

#3 Jumping Right into Real Trading

The trading simulator is a must for any beginner trader.

You can trade with fictitious money in real market conditions, giving you a safe environment to make your first mistakes without financial consequences. Getting to grips with trading tools, analyzing markets, building your trading routines and plans… All these actions can be perfectly carried out on a trading simulator.

Before transitioning to real trading, ensure you’ve mastered the trading environment and have a solid, well-tested trading strategy. The simulator is where you should iron out the technical details of your trading plan, making sure everything works as expected in different market conditions.

That said, by spending sufficient time on a trading simulator, you save yourself the initial technical struggles and can focus more on managing your emotions and maintaining discipline when you finally move to real trading. 

#4 Chasing the Perfect Trading Strategy

There is no ready-made winning solution to make money in the markets.

While thousands of strategies, indicators, and algorithms are available online with seemingly impressive performances, it’s crucial to remember that if simply copying an existing system were enough to succeed, more than 90% of traders wouldn’t be losing money.

To achieve better results than the average trader, you need to step away from the crowd and cultivate your own competitive edge. The best trading system is one that is custom-built to align perfectly with your individual strengths, skills, and personality.

Existing strategies can certainly inspire you, but your true success hinges on your ability to view the market in a way that others don’t. If you’re merely copying another trader, you’ll never fully develop your own skills and will always be dependent on someone else’s approach.

Also, if you’re looking to copy another “successful” trading strategy, you’ll always remain dependent on someone else. Remember why you got into trading in the first place. That sweet taste of financial freedom, right? So why shackle yourself to someone else’s playbook?

So, take those existing strategies, dissect them, learn from them. But then? It’s time to roll up your sleeves and craft your own unique approach.

#5 Starting Big Without a Trusted Broker

Choosing a reliable and reputable trading broker is crucial for anyone beginning their trading journey. Every year, countless beginners fall victim to scams or get lured by seemingly attractive trading offers that are actually set up to work against their best interests.

Before you even think about opening a real trading account, it’s essential to thoroughly vet your broker. After all the preparation you’ve done on a trading simulator, the last thing you want is for the money you’ve deposited into your trading account to vanish into thin air because of an untrustworthy broker.

Once you’ve opened a real trading account, it’s vital to take things slowly. The psychological and emotional biases that come into play when trading with real money should never be underestimated. 

While making money in a simulated environment may seem easy, the reality of trading with real money is a completely different experience.

Start by trading with small position sizes, ensuring that any losses have a minimal impact on your overall trading balance. This conservative approach allows you to protect your capital while gradually building confidence and refining your trading strategies. As your results improve, you can cautiously increase your risk exposure.

Additionally, it’s wise to avoid holding positions overnight, as markets can open at prices different from where they closed the day before—a phenomenon known as an overnight gap. This sudden price shift can lead to unexpected and significant losses, so it’s best to close positions before the trading session ends to protect yourself from this risk

#6 Approaching Trading as a Full-Time Job

One of the biggest mistakes aspiring traders make is jumping into trading as if it’s a full-time job right from the start. 

This approach often leads to overwhelming stress and financial disaster. Rushing through the learning and experience-gaining phases is a surefire way to hit a wall head-on, leaving you frustrated and disillusioned.

Trading is a highly complex activity that requires not just technical skills but also deep psychological resilience, and it’s not something that can be mastered overnight. Rather than taking a big leap into the unknown by dedicating all your resources—time, money, and energy—to trading, it’s much wiser to approach it gradually.

Think of trading as a hobby at the outset, not as your primary source of income. Just as you might set aside a “shopping budget” or a “ski budget,” you should define a “trading budget” that aligns with your financial capabilities. This budget should be money you are willing and able to lose, as losses are a natural part of the learning process.

In your first year of trading, your primary goal shouldn’t be to make profits but to survive long enough to gain experience and develop your skills. By focusing on mastering the basics and treating trading as a part-time activity or a hobby, you give yourself the time and space to learn, grow, and eventually, if all goes well, transition into more serious trading without jeopardizing your financial stability. 

#7 Chasing Profits Without Purpose

Trading isn’t a guaranteed path to wealth. Most beginners experience losses, but is financial gain the only measure of success?

Approached thoughtfully, trading becomes a catalyst for personal development. It’s about becoming more resilient and insightful.

The trading journey challenges your assumptions and tests your resolve. You’ll likely discover aspects of yourself you never knew existed.

Sure, it’s risky. It’s also wildly exciting. Your mission, should you choose to accept it: survive, learn, and try not to lose your mind (or shirt) in the process.

Interestingly, focusing on personal growth rather than immediate profits may be the most effective route to long-term success.