Mistakes to avoid: How not to drain your deposit?

27, Feb - BLOG

Everyone who decides to get into forex or stock trading wants to make money. When someone opens a trading account and replenishes it, the picture is always pleasing: the account in the shortest possible time shows impressive profits, allowing to buy a new computer, a car or even a house. The mere thought of these advantages makes us happy and delighted. We look forward to what comes next.

Wouldn't it be wonderful if trading was synonymous with profit and nothing else? Of course, life would be easy if traders were always making money. However, you have probably heard that it is possible to lose money in trading. You may have experienced losing trades yourself. Is there a way to avoid losses in trading? Together we will try to understand why traders lose money. Take a few minutes to learn how not to fail in the financial markets.

Rookie mistake: Ignoring training

It usually only takes a few minutes to click the ‘Buy’ or ‘Sell’ button and open a trading position. However, while trading may seem simple, it certainly isn't. If the market is not in your favour, you make a losing trade because in order to make money, you are putting your own money on the line.

You must realise that a losing trade is not the biggest problem. If you watch the trading volume and do not spend your entire deposit on a single trade, you will have a lot of money left in your account even after a losing trade. As a result, you will have other opportunities to open more profitable trades, but if you are impatient and too eager to make a quick profit, one bad trade can wipe out your entire deposit. You are then likely to become very frustrated and give up, so to avoid this it is important to take the time to learn. Reading books, taking courses and practising on a demo account will help you understand how the market works.

Emotion vs. Logic: How Traders Lose Money

Greed, fear and the desire to win back are the main enemies of a trader. Greed makes traders increase the volume of positions, hoping to make a quick profit. They neglect risk management and make deals without calculations. As a result, a small drawdown can lead to the loss of a significant part of the deposit.

Fear prevents them from earning, as traders close profitable trades too early for fear of losing their earnings. As a result, they do not get the most out of successful positions. Trying to win back is another common mistake, because after several losing trades a trader tries to get his money back as soon as possible, increases the volume of positions and breaks the strategy. This approach only accelerates the loss of deposit.

To avoid emotional mistakes, it is important to follow a clear trading plan. Discipline is the key to success. Experienced traders keep a diary of trades, analyse their mistakes and make sure that emotions do not influence trading decisions.

Trading without a Plan: The Path to Failure

Trading on emotion or intuition inevitably leads to losses. Successful traders always follow a strategy that includes clear entry and exit rules, risk management and the use of indicators to confirm signals. How to find a good trading strategy? The recipe for a profitable strategy is that it should consist of several elements.

In other words, you should not make a buy or sell decision based on a single technical indicator. Indicators and other technical analysis tools should complement each other. Combine two or three indicators of different types, such as moving averages and stochastics. Your trading strategy can also be based on candlestick and chart patterns and the use of Fibonacci tools. In this case, the system will give you signals with a high probability of success.

The importance of news: How to avoid surprises

News has a strong influence on the market. Stocks rise and fall depending on corporate events such as earnings releases, new product launches or mergers. Currency pairs fluctuate depending on macroeconomic data such as GDP, inflation and unemployment rates.

Ignoring the news background can lead to unexpected losses. For example, if you open a trade shortly before the release of an important economic report, the price may move sharply against you. Some traders prefer to trade on the news rather than using technical strategies. However, this style of trading requires special skills and experience. If you are not confident in your abilities, it is better to avoid trading during the release of important news.

Risk Management: Protecting Capital from Losses

The main cause of deposit drain is improper risk management. Even if you have a profitable strategy, excessive position volumes or lack of stop-losses will lead to capital loss. Never trade without a stop loss. A stop loss can even be very useful.

What better tool to limit your losses? When you set a stop loss at 20 pips, for example, you limit the amount you can lose on a trade. Professional traders recommend that you risk no more than 5% of your capital per trade. Even if your deposit increases, this approach will protect you from large losses.

Following the Crowd: The Trap for Traders

Many beginners make trades based on other people's recommendations or signals. However, most retail traders lose money, so blindly following the crowd is the wrong way to go. Trying to catch a trend reversal without confirming signals often leads to losses. The trend acts as a filter to help weed out bad trading ideas. Trend trading is preferable as the probability of success is higher.

Conclusion: How to save your deposit and make money

Most traders lose money due to predictable mistakes: lack of knowledge, emotions, trading without a strategy, ignoring the news, breaking risk management and following the crowd. If you want to save your deposit and succeed in trading, it is important to avoid these mistakes. Success depends on discipline, the right approach to risk and constant learning.

Trading is not a lottery, but a job that requires patience and a systematic approach. If you are ready to follow the rules, follow the strategy and control emotions, you have all chances to become a successful trader and avoid the deposit drain. It is important to remember that stable earnings come with time, and the key to success is continuous learning and adaptation to changing market conditions.