If you know what can go wrong in trading, it's easy to avoid them. Small mistakes happen all the time, like typing in the wrong stock symbol or setting the wrong buy level. But these are easy to forgive and, if you're lucky, can even make you money. What you should try to avoid, though, is making mistakes because you didn't think things through well. These are the "deadly" mistakes that can ruin not just one or two trades, but whole trading careers. To avoid these pitfalls, you have to keep a close eye on yourself and work hard.
Think of trading mistakes like driving a car on icy roads: if you know that driving on ice is dangerous, you can avoid travelling during a sleet storm. But if you don't know how dangerous ice can be, you might drive on it as if it's not a problem and only realise your mistake after you've gone off the road.
One of the first mistakes that new traders make is wasting a lot of time and energy trying to guess real trends. Traders can find possible trends by using formulas, indicators, and systems that are very hard to understand. They'll end up putting so many indicators on one screen that they can't even see the prices anymore. The problem is that they forget to make simple decisions about when to buy and when to sell.
Trying to understand too much at once is the problem here. Some people think that their system will "predict" trends better the more complicated it is. Almost always, this is a trick. When you rely too much on complicated systems, you forget the most important rule of trading, which is to buy when the market goes up and sell when it goes down. Since you want to buy and sell early in a trend, finding out when it starts is the most important thing. Complex indicators only make this information harder to understand.
Keep things simple. Using trendlines is one of the easiest ways to spot a trend. Trendlines are easy ways to tell when prices are going up or down. Prices are going up when they make a series of higher highs and higher lows (when prices show lower highs and lower lows). Trendlines show you the lower limits of an uptrend or the upper limits of a downtrend. Most importantly, they can help you see when a trend is starting to change.
Once you know how to draw trend lines, you can use them to figure out when to start doing something. After you've used these early signs, you can use more specific strategies to figure out exactly when to buy or sell. There are more complicated indicators and systems like moving averages, turtle trading, and the Relative Strength Index (RSI). But don't use them until you know whether the market is going up or down.
