Increase Your Skills As A Technical Trader
Each day, traders all over the world open their trading platforms, analyze their charts, and begin executing buy and sell orders on all types of assets. And each day, traders all over the world make the same basic trading mistakes. In this article, we are going to highlight a few of the most common mistakes that technical traders make each day. The truth is that many of these mistakes, once recognized, are easy to fix, and once they are fixed, these changes can have quite an impact on winning percentage and account equity growth.
Don’t Buy At Resistance and Sell At Support
This is a huge financial mistake many new traders make. If price builds up a strong base of support at a price level and then begins to put pressure on the price level, many traders will want to go short before price confirms a breakthrough, but most of the time this type of trading approach will lose money. Patience is required.
At the red arrow, if a trader had gone short on the break of the blue line, he would have lost money on this trade, and as we said, if you trade like this, you will tend to lose money over the long term. Sellling at support is a bad idea. Conversely, buying at resistance is likewise a bad idea. As a trader, you want to be buying at support and selling at resistance. This is trading with probability in your favor. The safe way to sell at support is to let price break through support, confirm downward movement, then as it comes back up to retest support, then go short as support should now act as resistance. But simply selling at support is a way to lose money.
Don’t Chase Price
New traders often fall victim to chasing price. They open their trading platform, begin scanning their charts, and notice movement on a specific currency pair. Price is moving up and it seems like it going to continue, so the trader enters long. Then, just as a long order is entered, price turns around and begins falling just as quickly. The trader gets scared and realizes that price is not rising as he had hoped, so he exits the trade for a loss, and just as he does, price turns around, comes back to his entry and continues to move up.
This scenario is known as chasing price and it will drain an account very fast. The only way to trade consistently over the long-term is to have a very clear trading plan. There must be a clear plan that guides your trading decisions, and then execution of that plan must be near perfect.
Most new traders still have a very strong emotional attachment to losing money. In fact, most new traders hate to lose money, and they will oftentimes do all they can to avoid it. Thus, when most new traders have a losing trade, the immediate reaction is to move on and forget about the trade because the emotional pain of a loss is real and strong. However, winning traders realize that some of the most valuable information they can ever get is in losing trades. Thus, analyzing losing trades is essential, and the best forex software programs may help.
Think about it. If you win a trade, what did that trade do? It did exactly what you thought it would. Trades that lose, however, do something you did not expect. Finding out why a trade did not work out can give you powerful insights into your trading strategy, which can in turn increase your winning percentage and account equity over time.