If you want to succeed in trading and more generally in investing in the financial markets, our expertise has enabled us to identify a number of common mistakes that beginners make when they start to compete in trading.

So, to ensure that you don’t make the same mistakes as a huge number of novice retail investors, without further ado, here are the top 10 mistakes that most investors make.

Mistake number 1 : thinking that strategy is not necessary

What we mean by trading strategy is really a kind of guideline that will allow you to know in advance when you will enter a position, when you will exit. In concrete terms, this means being able to have a structured plan and to define in advance your protective stop and potentially your take profit.

As you will have understood, buying stocks, crypto, or even CFDs, is not done randomly and requires having a concrete trading strategy, which will allow you to have by extension a money management in the management of your trading account.

From experience, we know that most novice investors, although aware of the strategic aspect of trading, will not take into consideration setting protective stops. And yet, if you make the effort to learn how to set what are also called stop losses, you can already distinguish yourself from the vast majority of traders who do not, and who will ultimately lose their capital.

Never forget, not using a stop loss can be truly fatal for your capital. Also, never underestimate the unpredictability of the financial markets, for example due to economic news, or unexpected geopolitical movements. If you don’t set a protective stop, you won’t even have time to cut your position yourself as your broker will have done it for you, which is known in trading jargon as a margin call.

The margin call, which is expressed in the form of a loss rate that must not be exceeded, is a kind of security deposit that will be a compensation in case of need.

If you do not apply a concrete and reasoned trading strategy, it means that you will let your emotions drive your behaviour in the markets, with all that this may imply in terms of irrationality. The trading plan is one of the foundations of the psychological mastery needed to succeed in the markets, there is no trader who manages to make money in the long term without a trading strategy.

Tip : Learn as soon as possible to put protective stops before making any trade, this is getting ahead of 90% of beginners.

Mistake number 2 : Underestimating the psychological aspect of trading

The psychological aspect is one of the most fundamental factors to take into consideration, as it is simply the one that will allow you to achieve long-term results in the stock market.

Many studies have shown that most retail traders lose out in the long run because they totally underestimate the psychological aspect in their understanding of the financial markets. This is particularly the case with volatile markets, such as the crypto-currency market which is very fashionable at the moment, where there are countless investors who give in to their emotions and act a bit like in a casino, under the influence of totally irrational reasoning.

It must be said that not everyone is equal in terms of psychology, risk tolerance etc. but one thing is certain, underestimating the psychological aspect of trading is a very serious mistake that you will pay for sooner or later.

In reality, if you want to be a good trader, emotions should not be a factor in your decision making, but rather your trading plan, which will allow you to know why you are buying, why you are selling at a certain time, what your objectives are etc.

The goal of a serious trader is not so much to make money, but to define a consistent trading strategy based on technical and fundamental analysis and stick to it no matter what.

It is also important if you are prone to emotion, to work on this aspect, whether through sport, books or through practices such as medication or yoga, as this can have a concrete impact on your results and performance as a trader.

Tip : You should try for example to think more in pips than in money earned, as this is much easier from a psychological point of view.

Mistake number 3 : launching too many trades

In addition to the psychological aspect, we find that many retail investors tend to make far too many trades, especially when they are in a losing session and hoping to recover. This is where the psychological dimension comes into play, which is therefore fundamental, and where the importance of the trading plan is revealed.

Indeed, if you organize your day with a trading plan, or even your week, you will be able to know the number of trades you will make, the maximum loss you are ready to take in relation to your capital (within the framework of an intelligent management), but also potentially the number of hours you will spend in front of your charts

Tip : The more you work on the organisational aspect of your trading, the better you will perform in the long run.

Error number 4 : The importance of specialising

In order to gain efficiency and understanding of the financial markets, it is ideal to specialise in one or two markets and then one or two assets, which allows you to gain a lot of knowledge and develop winning strategies. Unfortunately, many individual traders switch from one market to another, especially when they have lost money in one, thinking they can make up for it in the other. However, each market has its own characteristics and specificities, so diversifying markets makes it much more complex. Choosing a market should be correlated to your trading style and goals, not just volatility or greed.

Tip : for example, there are markets that can be interesting for beginners, such as trading the DAX40, which has a lot of resources in terms of analysis on the net.

Mistake number 5 : Know how to take your loss

This aspect is totally related to that of psychology and the need to have Money management in place through a trading strategy. If you don’t have a stop loss in place, you’ll be waiting for the price to reverse and you may not want to cut your losses while waiting for the curve to reverse.

This is one of the best ways to lose money and believe in luck, with an extremely low success rate.

It is also the best way to make completely irrational decisions, which would never have happened if you had a clear plan as to why you made the actions you did and what your trading goals were.

Tip : Make it imperative to have a consistent trading plan and money management in place

Mistake number 6 : Stalling in demo mode

Using a demo account is one of the best ways to learn trading. As well as familiarising you with the trading platform, and the different markets, it’s a great way to test out strategies etc.

However, there is no substitute for real trading, for the simple reason that the emotional aspect is totally absent when you trade with a demo account.

And yet, dealing with the psychological aspect of trading is fundamental in order to sharpen your skills and gain experience. So consider the demo account as a temporary way of learning and familiarising yourself but be careful not to waste too much time with this tool as you will end up wasting time by not confronting the full complexity of investing with real money.

Tip : The use of a demo account should not exceed three months. As such, the eToro broker’s demo account>> is one of the few that offers unlimited time to practice, while other brokers usually limit it to one month

Mistake number 7 : not training

Training is an extremely important aspect if you want to progress and be profitable in the long term in the stock market. Lack of knowledge is one of the aspects that is very often neglected by novice traders, who rely much more on their instincts than on proven trading methods like technical analysis for example.

So our advice to you is to never stop learning, whether it’s through reading educational kits like you are doing now, watching YouTube videos, even reading books or through paid training.

In any case, training is really very important to progress and cannot be neglected. The more you train, the more you will understand the functioning of the financial markets, their psychology, and the more you will increase your chances of making money in the stock market.

Mistake number 8 : going all-in on an asset

Putting your entire capital into one asset because you think you’ve spotted an opportunity you can’t miss is a real mistake. This is because by not diversifying your investments, your capital is exposed to considerable risk and you are totally at the mercy of your asset’s movements. Of course, if seven assets do not move in the direction you want, the emotional dimension will override your reason, and you will accumulate mistakes, which can be dramatic for your capital.

The best thing to do is to diversify your risk, by investing in a few assets, in order to secure your investments.

Mistake number 9 : choosing a broker at random

The choice of broker is extremely important as it will be your companion throughout your stock market investments. The risk of choosing a broker at random is that you may simply end up with a scam, or a broker that is simply not performing well, whether in terms of fees, trading experience, quality of execution, or even educational offerings. Reading reviews of stockbrokers and taking the time to compare them is obviously a winning move in order to find the broker that is not only reliable, i.e. regulated and secure, but that can fully meet your needs and expectations.

Tip : if you don’t know which broker to choose, we recommend eToro, which remains the reference especially for beginners. feel free to read our eToro review, to get an idea

Mistake number 10 : Investing money you need

This is unfortunately one of the most common mistakes in stock market investing with individuals, namely investing money you need to live on. Indeed, the only rule to consider is to invest money in the financial markets that you can lose without it impacting your daily budget.

Because if you use money that you need to live on, not only is it extremely dangerous, but above all this aspect will unconsciously condition your decisions, and as explained above, it is important to master as much as possible the psychological dimension linked to trading, which will inevitably be exacerbated if you use money that you cannot afford to lose.

Mistake number 11 : Blindly following advice

Obviously, as part of your trading education, you’re going to have to take into consideration the analysis of traders, whether it’s individuals like you, professional analysts, or even the use of copy trading or a trading robot.

Unfortunately, blindly following the recommendations of an outsider is not ideal for teaching you how to win in the financial markets.

If we take the popular example of social trading, i.e. automatically copying the positions of individual traders, you may make a profit, but you will not make any progress in your understanding of the stock market and the markets you are involved in. Moreover, you are totally dependent on others and, above all, you are dependent on their actions and you do not control the risk associated with their positions.

And as you know, one day’s performance is not necessarily guaranteed over time, and even the best traders can have drops in performance that can sometimes last for many months due to multiple factors that you cannot control.

The best thing to do is to use others as a means of learning, with a certain distance, but not as an end in itself by mindlessly copying an analyst’s advice or using a trading robot in the hope of making money.