Thanks to the countless financial markets in the world, trading has become more accessible and convenient. But as they say, some things are hard to change, this includes the common mistakes that are even brought up by the newest generations of CFD traders. The three most common mistakes of traders from then up to now are – miscalculations of risk and reward, impatience, and getting involved in too many risks.
So, how should you deal with it? Read along and learn more about this generation-long problem.
Top Three Common Mistakes of CFD Traders
1. Miscalculations of Risks and Reward
Risks and rewards are words you often hear when trading. They might also come together, these two are from different sides. When you trade, you need to balance the risk and the reward properly. According to studies, a miscalculation on the balance which appears in risk and reward is the most common mistake of traders. There are still a lot of traders who don’t learn their lessons before opening their account. Traders are always reminded to abandon their CFD trading position if it is losing so much. These traders tend to hope that their trades will recover only to get disappointed and lose a lot from their decisions.
The same thoughts also go with profits. There are still a lot of traders who tend to get eager to earn profits as quickly as possible, as they worry it will soon disappear. The solution to this mistake is to weigh the risk versus the rewards before you even place your trade. If you think that the trade won’t fit the requirement then it is better to pass on with it and wait for a better opportunity to come along.
Patience is just one of the many traits that a CFD trader must possess. Unfortunately, this trait is mostly unheard of traders thinking that it is better to act fast and grab the opportunity without even thinking about its risks and rewards.
You cannot predict the market. No matter how exceptional and knowledgeable you are, you will not know the movement of the market and which direction will it go as soon as you enter your trade. Remember that trades need to be developed over time. Stop losses can also offer you a great advantage, as it helps you protect your trades when everything goes out of hand.
3. Risking A Lot of Capital in One Trade
As they say, you should only trade what you can afford to lose. But this does not mean that you can risk almost all your capital in one go. This has been a common mistake among traders that can only be corrected now. Did you know that professional traders only risk about 1-3% of their capital in a single trade? This should be a fair reminder to you to start conservatively. This might be contrary to the nature of those new traders but there’s nothing wrong to follow the steps of those seasoned traders.