Many beginner traders jump into the market with lofty ideas and high profit expectations.
Here are the top 7 gold trading mistakes.
1. Failing to have a Gold Trading Plan.
When it comes to trading gold online, if you fail to plan you will simply fail as a trader. Most traders lose money. In order to become a successful gold trader, you must have a written trading plan. Your detailed guide is very personal. It should include how much money you are willing to invest in any trade, the maximum amount you are willing to lose and the precise exit and entry points for each of your trades. It should include your daily trading routine, hours and days when you schedule your trading activity, and the numbers of trades and risk you limit yourself to in a given week. Keep a trading journal which logs all your trades including entry price, exit price, dates and time and any important notes for yourself such as DO NOT MAKE THIS TRADE AGAIN! Never deviate from your plan when you trade gold online.
2. Not Doing Proper Market Research.
This is especially important for beginners. You must be familiar with the market that you are trading. Before trading gold, take some time to understand seasonal trends, timing of data releases and trading patterns. Investigate the history of gold and how the market has changed around the world over the years. Look at historical price ranges to help manage your trading expectations. Remember, Knowledge is Power.
3. Continuing to add to a Losing Trade.
How you manage your losing trades is the difference between your success and failure as a trader. Even the best traders in the world have losing trades. Learn from your losing trades and determine how you can take steps to consistently reduce your losers and extend your winners. Learn how to step back and organize your thoughts before adding any more money to a losing trade.
4. Failure to use a Stop Loss.
Its important to have a stop loss order for all your gold trades. It allows you to exit a trade at a certain price that you specify. This helps you to control your losses and manage risk. Determine what your stop loss is before you even enter any trade. Never Trade without using a Stop Loss.
5. Risking more than you can afford to lose.
An important question to ask yourself is how much of your capital are you willing to lose on each trade? Gold traders should only risk 1% or less of their capital on any one trade. You can order stop losses on each trade so that no more than 1% of your trading capital is lost. To control your daily losses, make sure you have a daily stop loss for yourself. For example, if you lose 2% of your capital in one day, don’t continue to trade for the rest of the day. Never Risk more than a small portion of your trading account on any single trade.
6. Not Having and Following a Strict Set of Rules.
There is nothing worse than taking a big loss in the Gold market that wipes out all the wins that you worked so hard for. The mental and emotional drain on your mind can be hard to recover from. It happens when you fail to follow your rules. Most traders don’t fail because of a lack of winning trades, they fail because of that one big loss that wipes them out. You must be very strict about the trades that you enter. You should only enter high probability trades in your favour. You also need to have an exit strategy to know when you are going to exit that trade that goes bad. Stick to your rules and don’t be afraid to walk away and cut a loss on a bad trade.
7. Failing to Master your Mind and Emotions.
Never base your trading decisions on the Fear of Missing Out. Don’t rely on the trading ideas of other people in Chat Rooms and Social Media. Develop your own trading strategies and take small baby steps so that you can get proper sleep every night. Trading is a numbers game and not a place for overly emotional people. Avoid making any trade out of revenge. The gold market does not care if you have lost or made money. Chances are that if you find yourself becoming overly emotional when trading, you are probably taking on position sizes that are too large and are outside of your trading plan. Stay focussed on the big picture and stick with your trading plan.