In the world of trading, success is not measured by the number of trades you open, but by your ability to stay in the market and manage risks wisely. Here are three common misconceptions among beginner traders, and why they lead to inevitable losses:
1. The illusion of "capital recovery"
- Misbelief: "I will just wait a little, and prices will return to what they were."
- Reality: Markets do not adhere to your expectations, and the opposing trend may continue for months. Holding onto a losing trade without a clear exit plan often leads to a zeroed account.
- Solution: Using a stop loss is a necessary defensive tool, not a sign of weakness. Accepting a small loss is better than waiting for the unknown.
2. Overconfidence in momentary predictions
- Misbelief: "This trade is guaranteed!"
- Reality: There is no guaranteed trade in the market. Even the strongest analyses remain probabilities. Making decisions based on emotion or haste can wipe out capital in minutes.
- Solution: Create a trading plan before entering the market, specifying your entry point, profit target, and stop loss. Be prepared for the possibility of the trade failing.
3. Emotional drift in repeated buying