In the world of trading, even with a well-thought-out strategy, it is easy to make mistakes that can erode profits or cause significant losses. Here is a summary of the most common mistakes when executing a trading strategy:

Common Mistakes in Trading Strategies

Lack of Discipline and Adherence to the Strategy: This is perhaps the most critical mistake. Once you have a trading plan (which includes entry points, exit points, and risk management), not sticking to it is a recipe for disaster. This happens due to:

Impatience: Entering too early or exiting too soon.

Fear (of losing): Closing winning trades out of fear that the market will reverse, or holding losing trades hoping for a miracle.

Greed (for making more): Holding winning trades beyond the target, risking a reversal.

Trading on impulse: Making decisions based on emotions or "gut feelings" instead of the logic of the strategy.

Poor Risk Management: Many traders underestimate the importance of protecting their capital.

Not using "stop-loss": Essential to limit losses on a trade. Trading without it is like driving without brakes.

Risking too much per trade: Exposing a very high percentage of total capital in a single trade can lead to ruin quickly. A common rule is to risk no more than 1-2% of capital per trade.

Incorrect position size: Trading with a volume too large for the size of your account, which magnifies losses when the market moves against you.

Overtrading: Making too many trades without clear justification or without the strategy demanding it.

This is often driven by the pursuit of action, impatience, or the attempt to quickly recover losses.

Every trade involves commissions and spreads, which accumulate and can erode your profits even if your win percentage is good.

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