Retail investors don’t learn their lesson; each time they suffer huge losses because of these reasons. Are you also paying for the same mistakes? Every loss is a profound lesson, but why do most traders still find it difficult to avoid repeating the same mistakes?
First, heavy positions will lead to death, the cost of greed. Trading with heavy positions is one of the easiest mistakes traders make. When you invest a large amount of money in a trade, you are effectively replacing rational decision-making with a gambler's mindset. The volatility of the market means that any trade carries risks, and heavy positions only amplify these risks, making it impossible for you to bear potential losses. Heavy position trading often leads to a broken capital chain, or even complete exit. The unpredictability of the market means you can never guarantee that every heavy position will be profitable. It is advisable to diversify investments, strictly control the risk exposure of each trade, keeping the risk of each trade between 1% and 2%, ensuring that even if losses occur, they will not deal a devastating blow to the overall capital.
Second, no stop-loss will lead to death, the grave of luck. No stop-loss trading is the second major pitfall for traders; without a stop-loss plan, you cannot effectively control risk, ultimately becoming a passive target of market fluctuations. No stop-loss trading can prevent you from exiting in time during losses, causing the loss amount to continuously expand, or even leading to total loss. It is advisable to clearly set stop-loss points before each trade and strictly enforce them. Stop-loss is not giving up, but a basic respect for market risk.
Third, greed will lead to death, the trap of desire. Greed is one of the weaknesses of human nature, and traders often try to earn unrealistic profits, resulting in neglecting the potential risks of the market. Overly pursuing profits can make you hesitate when in profit, ultimately missing the best exit opportunity, or even lead to profit loss. It is advisable to set reasonable profit targets and exit promptly when the targets are reached. Remember, trading is not charity; your goal is to make steady profits, not to get rich overnight.
Fourth, blind entry will lead to death, the ignorance of the fool. Blind entry is a manifestation of lacking a trading plan; without a clear entry logic, you are merely gambling rather than trading. Blind entry can make you lose direction in the market and ultimately fall into a pit of losses. It is advisable to develop a detailed trading plan before entering, including entry points, stop-loss points, take-profit points, and risk-reward ratios; only when the plan is clear can you enter with confidence.
Fifth, frequent operations will lead to death, the lack of patience. Frequent operations are a manifestation of traders' eagerness for success. Overtrading not only increases trading costs but also raises the probability of making mistakes. Frequent operations can exhaust you in the market, ultimately leading to mistakes due to fatigue and emotional fluctuations.
Sixth, left-side trading will lead to death, the error of timing. Left-side trading refers to forcing entry when the market trend is unclear, which often leads you to fall into a pit of losses. Left-side trading exposes you to huge risks during market fluctuations, ultimately leading to losses due to misjudgment. It is advisable to wait until the market trend is clear before entering. Right-side trading may miss some profits but can effectively reduce risks.
In the trading market, many people are superstitious about 'frequent trading' and 'daily compounding', believing this is a shortcut for small funds to grow quickly. However, the truth is: frequent trading will not make you rich; instead, it will lead you into the abyss. Today, we will unveil the fatal traps of frequent trading from multiple perspectives such as mathematical probability, cognitive dimensions, and market structure, and tell you the true core of making big with small funds—pattern and cognition.
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