5 Mistakes Beginning Precious Metals Traders Should Avoid at All Costs

Post Time:2015-06-02 Resource:www.hj9999.com Views:

5 Mistakes Beginning Precious Metals Traders Should Avoid at All Costs
It is estimated that 95% of small “retail” traders lose their money and eventually quit trading altogether, leaving the winning for the remaining 5% of large institutional investors and professional traders. The reason for this statistic is not because the professionals are privy to some insider market secrets, but often because beginning traders make the same mistakes over and over again.

Going from a trading novice to a pro isn’t something that happens right away. It takes time to get in the swing of things and get your bearings in the world of online bullion trading. however, as you continue to learn and grow as a trader, we want to tell you about several common mistakes first-time—and even some experienced—traders make so that you can avoid them.

Mistake #1: Failing to Have a Trading Plan
"Just winging it" may be okay when deciding where to eat for lunch or what movie to see, but this philosophy generally doesn’t fly in the investment world. The financial marketplace is a chaotic entity made up of a constantly changing web of factors, with each thread affecting other parts of the web in ways that you might never have predicted. Without a trading plan to guide you through, it is easy to get trapped in a big loss.

There are many online resources and samples that can help you start your own trading strategy. Just make sure that your plan includes answers to key questions like:

What market(s) do you want to trade in? (For example, if metals are your interest, do you want to trade just gold, just silver, or both?)
How much money are you willing to trade with (and potentially lose) without affecting your lifestyle?
What will be your criteria for entering a trade? (Example: The price of gold or silver must drop below X amount.)
What will be your criteria for selling? (Example: Won’t sell unless you stand to make at least a 15% return on your investment.)
What kind of trading do you want to do—hedging or speculating? Do you want to be a day trader, scalper, long-term investor?
When will you to actively trade and how often?
What are your trading goals?

Mistake #2: Letting Emotions Drive Trading Decisions
Traders tend to have a bad habit of getting too emotionally invested in their financial investments, especially in the beginning. From the moment they make a purchase, the strong desire to see their trade succeed can cloud their senses, causing them to fudge on their trading plan or hang onto losses for far too long in the hopes it will eventually come back around.

Similarly, beginners get too excited when a trade is going well and close out the minute a profitable position is established, consequently losing out on further potential increases by quitting the trade too early.

As a trader, you must learn to brush off the minor losses and instead focus on sheltering yourself from taking a big hit that knocks you out of the whole game. The best way to do this is to stick to your plan.

Mistake #3: Rebound Trades
Another common mistake traders make is trying to win back the money lost on a failed trade by jumping back in the market immediately afterwards. This is called “chasing” your losses, and it’s one of the worst things your can do after taking a loss on a trade. More likely, you will end up losing more than you did initially. Our advice is to take a short break from trading until you are able to strategize your next move.

Mistake #4: Poor Risk Management
It’s easy to get swept up in the momentum of an upward market and end up over-budget. Trading can be very exciting, but buying too much based on adrenaline is a very risky way to invest your money—and risk management is a critical component of successful trading. Your trading plan can be a huge help in preventing you from letting the thrill of the game expose you to too much risk.

Mistake #5: Waiting for that "Big Win"
Lastly, on the opposite end of the spectrum as over-buying, some investors make the mistake of staying out of the trading game too long because they are waiting for that “big win,” rather than seeking out smaller, more gradual trades. If all you do is wait for the perfect circumstances to buy or sell, then you’ll end up missing out on a lot of smaller money-making opportunities, which often adds up over time to more than a big trade ever could.

Source:  Elemental vault

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