If you know the pitfalls of trading, you can easily avoid them. Small mistakes are inevitable, such as entering the wrong stock symbol or incorrectly setting a buy level. But these are forgivable, and, with luck, even profitable. What you have to avoid, however, are the mistakes due to bad judgment rather than simple errors. These are the deadly mistakes which ruin entire trading careers instead of just one or two trades. To avoid these pitfalls, you have to watch yourself closely and stay diligent.
Think of trading mistakes like driving a car on icy roads: if you know that driving on ice is dangerous, you can avoid traveling in a sleet storm. But if you dont know about the dangers of ice, you might drive as if there were no threat, only realizing your mistake once youre already off the road.
Too many traders are fixed on only one market. They may trade only the forex USD/EUR, or the E-mini Russell, or the E-mini DOW, or just certain stocks, etc. While they may feel a certain sense of expertise or mastery over this one market, no one, no matter how experienced they are, can predict what will happen all the time. These people are setting themselves up for catastrophe, because there will inevitably come a time when theyll make a mistake. And, with no diversity in their trades, they will lose everything theyve worked so hard to gain.
The key to choosing a market isnt to look for one you seem to understand better than the others. That will always be something of an illusion. But there is one market you can always depend on: the one that is moving. You know you should buy when the market goes up and sell when the market goes down. A moving market will always be profitable, even if youve never traded a single share there before.
Pay close attention to trendlines, both in the markets where youre already trading and the markets youre considering. If one of your markets is consistently choppy or just moving sideways, get out of it and move on to another. If you think of successful trading as sticking not with a market but with a trend, no matter which market its in, then youre thinking successfully.
The key, of course, is that you have to keep an eye on markets where you arent currently trading. Keeping up with your options is just as important as watching what youre familiar with. This is where research and experience come into play. Getting to know a number of markets (and how to find out about them) takes time. But dont let that discourage you. Also, dont feel like you have to understand every option at the very beginning. Pick a few different markets to actually trade in, but also choose a few just to watch. That way, youll see how your own trades work, and you can also compare that activity to markets you may not know much about (yet).
The only way to learn about which markets are right and wrong for you is to watch them. Watching a variety of markets will give you the knowledge youll need to use when its time to change gears and find that elusive moving trend.
Original pictures take http://college.usatoday.com/2012/02/02/new-grads-guide-to-personal-finance/ site
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