3 Big Mistakes New Traders Make

As a new trader, it’s easy to fall susceptible to some pitfalls that can hinder your progress towards profitability.

In the room, we have people joining from all experience levels, and there is a trend within new traders I see of them making the same repeatable mistakes over and over.

Today, I wanted to break down the top 5 mistakes that new traders make when beginning their trading journey and how you can avoid them yourself.

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1. Trading A Paper Account For Too Long

The problem with paper trading accounts is that they remove the biggest thing that affects your trading process… EMOTIONS! When you are just trading imaginary money on a demo account, you won’t respect your stops properly, take more risk than you would with real money, and trade recklessly whether you know it or not. There is no real money tied to the trade you are putting on so emotions like anxiety, greed, and fear won't affect you.

You should only paper trade for a few days as a new trader with the sole purpose of getting used to submitting live orders on a platform.

Never rely on paper trading for too long. Jump into a live account with SMALL size. Risk even $50/trade to start off. Putting real money on the line no matter how small will still simulate the real emotions of trading better than trading monopoly money.

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2. Scaling Up Too Fast

The opposite of the new trader who paper trades for months is the trader who opens a new account and immediately begins scaling their size up too quickly. They jump in and expect to make a million dollars in their first year, size up with no or little experience trading live, and ultimately dig themselves into a major hole.

Like I said before, there is nothing wrong with starting small. Start by risking a small sum like $100/trade. Once you see consistency there for a few days and are comfortable, move up $50 or $100 more risk per trade.

Slowly scale up your size and never try to push yourself too much. Yes, as you size up you will feel uncomfortable, and embracing that uncomfortable feeling is a good thing… BUT there is a difference between being uncomfortable from increasing size in a proper and safe manner than recklessly increasing your risk per trade by 5X.

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3. System Hopping

I see this so much in new traders. They are always trying to find the ‘perfect’ pattern, indicator, or system.

Let me tell you this… NO system will give you a 100% win rate. There is no secret sauce out there. With the amount of noise on the internet floating around today, it is easy for you to get trapped on the cycle of hopping around from system to system.

If you adopt a system, learn it thoroughly, and have a losing week that is ok! It happens to us all. The difference between professional traders and newbies is that they realize that is a normal cost of doing business, and they don’t abandon ship and hop to a completely new strategy longing for perfection. Stick to your system, make subtle optimizations to it, but never abandon it entirely unless your stats prove that it is an unprofitable system in the long run.