COMMON MISTAKES TRADERS MAKE IN TECHNICAL ANALYSIS.

Hello everyone,

I'm delighted to be a member of this community and today I would like us to talk about some common mistakes traders make in technical analysis.

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Technical analysis is one of the most common ways of analyzing the financial market. It is applied by traders in analyzing various financial markets be it crypto, stock, or forex.

It's popularity has since grown with the growth in day-trading which doesn't need much of fundamentals in analyzing the market.

In as much as there's massive increase in the use of technical analysis amongst traders, there's also increase in errors made by traders due to several reasons which we will be discussing below.

SOME MISTAKES TRADERS MAKE DURING TECHNICAL ANALYSIS

• Not cutting your losses

Based on priority, cutting your losses should be regarded as one of the most important means to a successful trading career because it's a means of protecting your capital.

This can easily be made a habit by always making use of a stop-loss which will see to it that you don't loss more than a certain amount on a trade.

Just as Ed Seykota said:

The main principles of good trading are (1) Cutting your losses. (2) Cutting your losses. (3) Cutting your losses.
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• Over trading

Over trading is a common mistake especially for those who have taken trading as a major career. Most traders believe they should take hold of every opportunity they see in the market thus making them to always have an open trade.

Trading demands a whole lot of patience in waiting for the right confluence. Most good traders ends up taking one or two trades in a day and yet come out with huge gains and this explains one of Jesse Livermore's quotes.

Money is made by sitting, not trading.
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• Revenge trading

Revenge trading usually occurs as a result of emotional control and that is a no no when it comes to trading. Trading requires analysis and an analysis isn't done so hastily.

For a trader to be successful, they should learn to take hold of their emotions to avoid them influncesing their trading decisions because trying to recover immediately after a loss only ends in more losses. It is best for a trader to take sometime off the market after a big loss in other to clear their minds and have a fresh start.

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• Not avoiding extreme market conditions

Traders should be able to know when the market is been driven by massive psychology. This drifts the balance between the usual supply and demand that moves the market.

Take the RSI indicator as an instance. We all believe the RSI indicator to be a momentum indicator which is used in identifying when the market is either overbought or oversold. When it reaches the 30 mark, we say that it is oversold thus a price reversal is expected.

In as much as the above claim is accurate, there are certain times when the market condition is extreme thus leaving the price is continue going down even though the RSI is way too oversold. A trader who doesn't take note of extreme market conditions will be left in losses if he expects a reversal after spotting the RSI in an oversold region.

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• Following other traders sheepishly

This is also one of the most common mistakes traders make. You will see most traders signing up for signal groups, paying for signals and going in search of free signals. This is a very wrong approach for trading is not a get rich quick scheme.

In other to be a profitable trader, you have to learn and develop your own strategy and with consistency and constant practice, you will see yourself at a height you never imagined.

CONCLUSION

Technical analysis is a very good method of analyzing the financial market. It involves the careful interpretation of price actions and the proper use of technical indicators.

In as much as technical analysis is a tested and trusted means of analyzing the financial market, most traders do also go about making some common mistakes which leaves them far away from becoming successful despite their level of knowledge in technical analysis.

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