New Trader's Common Mistakes Part 2

As a new trader, it can sometimes be hard to take a step back and evaluate the mistakes that are causing failures during the trading day. This series identifies the most common mistakes made by new traders in the hopes that they can be corrected.

Trading Journal: As a trader, take the time each day to analyze all the trades made that day. Write down answers to the following questions:

• What did I do right?
• What did I do wrong?
• What should I repeat?
• What should I not repeat?
• Was it a news day and if so, how did it go?
• Do I want to trade those news events again?
• Analyze your charts. Mark them up.

Social Interaction: Traders often hate their day job and dream of trading for a living. The dream is to "work for yourself,” but a trader cannot work alone. It is important to have social interaction while trading. Get involved in a trading forum or live trading chatroom. When trading the same system or instrument, bounce ideas off one another, this can help you learn and master trading rules. One of the best ways to learn something is to teach it. 

Know When To Stop For The Day: Treat trading as a business, with a plan of when to stop for the day. It is easy to let greed step in and lose all your profits. A good rule to follow is the five percent rule. Determine five percent of the account. When trades have profited five percent for the day, STOP. If trades have lost five percent, STOP. Suppose the account size is $1000. Five percent is $50. It may seem like the account will never grow by only making $50, but suppose you lose $500 in one night. That's half the account!

If the five percent rule is stuck to for a month of trading, a $1000 account would double provided there were five percent profits every day. With a $2000 account, that would double to $4,000 after a month of consistent profits. While this result is of course not guaranteed, it limits your downside every day. It is all about compounding, sticking to the five percent rule and being patient.

Being Impatient: This is one of the most common reasons new traders fail. Perhaps new traders have the impression that they can put in $200 and make $1000 after watching a 10-minute video. Other traders do not realize the importance of patiently trading a demo account until they are familiar with a system or strategy. Instead, traders jump in impatiently trading with live money and their trading accounts are soon wiped out.

Learn from mistakes. Set up for success. Free education is available at www.apexinvesting.com.