9 Things Traders need to do to Avoid 

9 Essential Steps to Avoid Catastrophic Failure in Trading

In recent months, the market has witnessed a surge in new traders, drawn by stock market volatility and increased free time. Many are venturing into trading as a hobby or a means to generate additional income. However, the reality is stark – most of these newcomers will experience failure. To increase your chances of success in trading, you must take the endeavor seriously and be prepared to put in the necessary effort. Here are nine crucial steps to follow:

1. Halt Trading Immediately If you've recently embarked on your trading journey, consider this advice: stop trading right now. It might seem counterintuitive, but there's a good reason for this. Trading is not something you can master overnight. There's a learning curve, and trading success takes time. It's akin to any other field where expertise is developed over time. Just as you wouldn't open a business without prior experience or start renovating your home without knowledge, you should approach trading with a similar mindset. Give yourself time to learn and grow.

2. Prioritize Learning Trading is a skill that demands learning and education. Whether you're trying to speak Spanish or become an electrician, you don't start by guessing. Trading is no different. It is vital to learn, and this education can take various forms. You might opt for online courses, conduct your research, or study the strategies of successful traders. Commit to a continuous learning process; it's the foundation of trading success.

3. Focus on Self-Sufficiency While it's entirely acceptable to ask questions and seek guidance, ensure that your questions reflect effort and thought. Avoid asking questions that can be easily answered with a Google search or those seeking to copy a trading strategy without truly understanding it. Successful traders prioritize self-sufficiency from the outset. They are eager to learn and apply their knowledge. By focusing on self-sufficiency, you demonstrate your dedication to the learning process, making others more willing to offer assistance.

4. Refrain from Seeking Stock Picks In trading, the focus should be on setups, not stock picks. Avoid asking questions like "What stocks should I trade tomorrow?" or "What are the best stocks to buy?" Instead, concentrate on creating trading plans with well-defined entry and exit criteria. A trade plan should include trigger rationale, entry price, stop-loss, profit target, and a timeframe. These plans provide structure and discipline to your trading.

5. Prioritize Risk Management Before you dive into trading, adopt a risk management mindset. Your primary goal should be preserving your capital, not becoming an overnight millionaire. Mastering risk management is crucial to ensuring you stay in the trading game. Estimate your risk before entering a trade by setting stop-loss levels and determining your position size accordingly. Once you're in a trade, it's your responsibility to cut losses when needed.

6. Develop Trading Plans To ensure that you make informed and purposeful trades, create comprehensive trading plans. Each plan should include trigger rationale, entry and exit prices, stop-loss levels, profit targets, and a timeframe for the trade. Without these elements, you lack a well-structured plan that can guide your trading decisions.

7. Avoid What You Don't Understand Avoid diving into the unknown when it comes to trading. Trading without a solid understanding of your chosen assets or strategies can be detrimental. Make sure you fully grasp the markets and assets you're trading. It's better to err on the side of caution and sit out trades you don't fully comprehend.

8. Trade with Funds You Can Afford to Lose Never trade with money you cannot afford to lose. Trading should be done with capital specifically designated for this purpose. Under no circumstances should you use money needed for essential expenses or use leverage without a proven strategy. Trading should not jeopardize your financial stability.

9. Differentiate Between Luck and Skill Lastly, be able to distinguish between luck and skill. Recent market conditions have been turbulent, and it's essential to analyze your successes to understand whether they resulted from luck or skill. Don't confuse short-term success with skill, as it may lead to poor decisions in the long run. Focus on developing your skillset for sustainable success.

In conclusion, trading is a challenging endeavor that requires commitment, discipline, and continuous learning. By adhering to these nine steps, you can navigate the complexities of trading and increase your chances of success. Trading is a marathon, not a sprint, and it's essential to approach it with the seriousness it deserves.

~MS

Founder, MARS EQUITY