10 Common mistakes to avoid when trading

As you should know by now, the market is unforgiving, especially when you don't know what you're doing. When it comes to trading, education is everything. And for beginners, it’s not just about learning what to do, it’s also crucial to understand and know what NOT to do.

You might be wondering, why do so many people lose money, even when they’ve done their research, learnt the right theories and practiced over and over again? Well, the answer lies in the habits, the behaviors, and the decisions that are repeated over and over again. In this article, we are going to uncover the common mistakes in stock trading that cost traders their capital and confidence

By the end of this course, you’ll not only recognize these trading errors, but you’ll understand exactly how to avoid them, so take notes as this course could potentially help you avoid some of the biggest mistakes that traders make.

Let’s get straight into it with the first and biggest mistake, trading without a plan.

1)Trading without a plan

One of the biggest and most common mistakes in stock trading is entering the market without a plan. If you don’t have a set trading plan, you’re basically entering the market blindfolded. You should always ask yourself: do I know my entry, exit, and risk level before I enter every trade? If the answer is no, well, you’re just guessing.

Trading mistakes multiply by a lot when decisions are based on impulse as opposed to strategy. Without a clear system put in place, you’ll likely chase price, panic on pullbacks, and you’ll second guess every one of your moves. But don’t worry, you can avoid it! Start by creating a written, structured trading plan, one that works for you. Understand your risk per trade and define your strategy, timeframes, and exit criteria. Once you’ve decided on a trading plan that works, stick to it.

2)Risking too much on a single trade

Ah, greed is really the silent killer in trading. It’s what tempts traders to risk large portions of their account, hoping for a quick win. But the truth is that this is one of the deadliest trading errors and all it takes is one bad trade to wipe out weeks, months and even sometimes years of progress. Common mistakes in stock trading often start from emotional decisions, particularly during drawdowns. Here’s how to avoid risking too much of your capital on a single trade. Make sure you use proper position sizing. Don’t risk too much of your own capital all at once. A consistent percentage of your account on each trade that most successful traders tend to stick to is typically 1-2%.

3)Ignoring Stop Losses

Allowing a losing trade to breathe sounds harmless in theory, until that small loss becomes catastrophic! A recurring common mistake in stock trading that seems to happen over and over again is not placing stop loss orders. Without stop loss orders, you're exposed to unlimited downside. Which can be catastrophic if the market decides to suddenly move against you. Make sure you are always using a stop-loss, and make it a habit to set it before you enter the trade. The rule with stop loss: respect it every single time, no exceptions, or you might regret it.

4)Chasing trades after missing the move

Fear of missing out, in other words, FOMO. We all know that one person who is at every single event out of FOMO, well, when it comes to trading, the principle is the same! Fear of missing out can lead to countless trading errors. How? You see a stock moving, you feel pressure to get in, and enter late, only to suddenly watch it reverse. And just like that, you’ve made a huge trading mistake that could have easily been avoided.

Chasing price is one of the most common mistakes in stock trading, especially for beginners. It can lead to bad entries, unclear risk levels, and poor decision making. So avoiding the FOMO is absolutely essential when it comes to trading! Remind yourself, if you missed the move, let it go. Wait for the next valid setup and make sure that it aligns with your trading plan. The market will always provide another opportunity, you just need to be patient.

5)Overtrading

Believe it or not, overtrading too often is another mistake that many traders seem to make. Although you might feel as though you’re being productive, the more trades don’t always mean the more profits. Overtrading is usually driven by boredom, revenge trading, or the illusion that constant action equals success. That’s simply not true, in fact, this can result in fatigue, reduced focus, and more even trading errors. Sometimes the best thing you can do is step back and give yourself a break. Set yourself a limit on trades per day or week and focus on quality setups over quantity.

6) Neglecting to review trades

If you’re not tracking your trades, how do you really know what’s working? Another commonly overlooked mistake in stock trading is failing to review past trades. Without reflecting on your trades, the same trading errors will repeat themselves over and over again. So to make sure you never forget to review your trades, keep a trading journal nearby, and after each session, note what went right, what went wrong, and what could be improved.

7)Letting emotions drive decisions

As we’ve seen in our previous courses, emotional trading is one of the leading causes of failure. Fear, greed, hope, and frustration can fuel endless trading errors every single day. So managing your emotions when it comes to trading is probably THE most important tool you will ever learn. Whether it’s holding losers too long or taking profits too soon, emotional reactions will always sabotage logic.

Common mistakes in stock trading are often emotional in nature, which in theory makes sense when you’re putting your own capital at risk, but recognizing this is key to developing consistency. So stick to your plan and step away if you’re feeling overwhelmed. Allow yourself time to think and remember, if it’s not part of your trading plan, you are probably acting out of emotion, so stick to the plan.

8) Jumping between strategies

New traders will usually try out a strategy for a few days and then switch. Then switch again to another. And then another. This leads to confusion, inconsistency, frustration and eventually, you guessed it: more trading errors.

This strategy hopping is one of the most common traps, and it’s typical for beginner traders. You could argue that switching strategies until you find one that is right for you is harmless, and in essence, you’re right. But how will you know what works until you’ve really given it a solid try. So start by choosing one proven method, a method that you believe aligns with your personality and stick with it for at least 50-100 trades before evaluating.

9) Blindly Following Others

Another mistake that many traders make is relying on others, for example Twitter, YouTube, or chat rooms for entry signals is a recipe for disaster. One of the most modern common mistakes in stock trading is blindly copying trades from influencers without understanding why they work. You might be lucky, and you might make a winning trade from something you saw on Twitter, but making this a regular trading style can be catastrophic in the long run.

When you don’t understand the setup, you won’t know how to manage the trade, and chances are that you’ll panic when things go wrong. So learn the ‘why’ behind every trade you take and use others for inspiration, not direction.

10)Trading without practice

Trading without practice, it seems like a clear no go doesn’t it? And yet, many traders are still entering the market without first practicing on a demo account. Imagine playing in a championship without ever practicing. You would never do it would you? So why do it when risking your own capital.

Failing to start on a demo account is one of the most underrated common mistakes in stock trading and it leads to unnecessary losses and frustration. So remember, always always always use a demo account. Test your strategies in real market conditions without risking capital. This will help you build skill and confidence before going live.

Conclusion: Avoiding Common Mistakes in trading is the first step to winning

Nobody is immune to mistakes. Even some of the best traders can make them. The difference is they recognize and correct them faster. So understanding the common mistakes in stock trading and recognizing your personal trading errors is the first step to consistency.

By now, you should have a good understanding of the most common mistakes traders make, and most importantly, you should know to avoid them! Here’s a summary of everything we’ve covered so far:

• Trading without a plan
  
  
• Risking too much
  
  
• Ignoring stop losses
  
  
• Chasing trades
  
  
• Overtrading
  
  
• Skipping trade reviews
  
  
• Trading with emotion
  
  
• Changing strategies too often
  
  
• Blindly following others
  
  
• Trading without practice

The market is dynamic and it rewards preparation, discipline, and reflection. If you understand these mistakes and you can eliminate these trading errors, you’ll already be ahead of the majority.

Ready to keep leveling up your trading game? Keep on reading the EC Markets Academy, we still have plenty of trading knowledge to unlock! See you at the next course!