It is a fact that trading training is like when we learn to ride a bicycle, the first few times we make mistakes that can cause us unexpected pain. Even so, no matter how many times we have gone cycling or carried out trading operations, we can always make an unexpected rookie mistake again. Let's start this trading training by listing 6 mistakes that every trader has made at some point.
1. Not setting a stop loss order on our trade
This par excellence is the most common mistake that we have all made at some point in our lives. At the same time, one of the errors that can have the most consequences if correct risk management is not applied. If we buy assets to keep them in an investment portfolio, the margins are wider and we can anticipate. For trading operations we must be more cautious, since market volatility or a black swan event can end up liquidating our account.
It seems that Greg did not read this trading training and made this mistake...
2. Over leverage
Yes, it sounds very tempting to be able to maximize your capital in less time than usual by using derivative products. But the truth is that it is also the tool that makes retail investors lose the most money. We must keep in mind that information within the world of investments is key, and we can anticipate the market, but there are certain times when we cannot have everything under control. We have a clear example with the bankruptcy of the company Voyager Digital (VYGVQ), which led to bankruptcy of this entity due to over-leveraging. This was one of the catalysts for the collapse of cryptocurrencies during the month of May 2022 or the possible collapse that Credit Suisse is facing.
Overleverage led companies like Voyager Digital to bankruptcy. Source: Delphi Digital.
3. Operate following the masses
It is true that the mass psychology It can be a fundamental study of our trading training. But what we also know is that we should not always listen to what we are told. We can usually operate based on statements we read about financial gurus or important analysts and strategists. But we must be critical, because possibly these personalities know the power of mass conviction they have and can exercise power over it.
They do not necessarily have to act in bad faith, but it is also one of the main characteristics of the frauds that are committed in the world of investments and, above all, in the cryptocurrency ecosystem. It can also be your brother-in-law presenting you with the “investment of your life.”
4. Invest based on emotions
Another mistake we can make is investing unfoundedly in an asset, simply because we like it. It could already be because it is a company that comes from our region and we want to support national commerce, an action that reminds us of a sweet moment from our childhood or the logo of a token that we find fun... Big mistake, in the world of investments we must tread carefully and above all not let ourselves be guided by emotions.
We can be very patriotic that if the action does not pay off, as in the case of Grifols (GRFS), it will be of no use to us. RyanAir (RYAAY) may remind you of those vacations you spent as a child in Palma de Mallorca, but its results may remind you of the turbulence you experienced on the plane. And not to mention the Shiba dog meme converted to cryptocurrencies (DOGE, SHIB…).
5. Not investigating the asset we are going to invest
In coalition with the previous paragraph, being guided by emotions can lead us down a bad path. But not investigating what we invest in can also give us headaches. For example, when the squid game phenomenon emerged just last year, a game token called Squid game (SQUID) emerged. Due to the hype, people began to invest in the token, without knowing that the token's Smart Contract blocked all incoming funds, allowing the creator of the token to drain the funds and then bring the price down to zero.
6. About trading
The last error that we will comment on in this trading formation is similar to the one we encountered at the beginning with the stop loss. There are times when, whether winning or losing, we can end up carrying out more operations than necessary. It is not good at all (neither for our wallet nor for our health) to over-operate. When we find ourselves in these situations, there are moments where losses can triple in a matter of seconds. Whether it's trying to recover a trade we just failed, or a good streak of winning trades. Trading should be treated with caution in certain situations, since we can end up developing addictions such as gambling addiction.
Example of the consequences of over-operating. Source: Youtube/Low Budget Stories.
Conclusions from this trading training
It is true that today we have not brought the typical delivery of analysis of the use of indicators and investment strategies. But what is true is that, as stated in the title of these articles, the topics that we have covered in today's trading training are of vital importance. Knowing about these mistakes can help us avoid harming our financial health, since they may seem like small mistakes. But in trading and investments it is already known; what is small can be translated to the biggest…