Trading with prop firms is a great way to generate profit from the funds they provide. Prop trading is simple yet challenging. Many times, traders end up getting into various scenarios that negatively impact their performance. They commit massive mistakes that eat up all the profit they had generated previously. Avoiding these mistakes can quickly help them be profitable in the business. However, traders must be cautious in every step, have proper deliberation, and consult with the mentor before making trades. 

 

In this article, we shall discuss the most common mistakes traders make when making trades and suggest ways to avoid them.

 

Not Planning Ahead

This is undoubtedly the most prominent mistake that traders commit. This is especially true for new traders who’ve just started making bets with the One Step Challenge prop firm. Not having a structured plan can lead to many bad decisions. This is why traders must develop a proper strategy before initiating their actions in the market. This plan offers a complete roadmap that lets them decide exact entry and exit points.

Planning before taking any step is necessary.  The downside of not having a structured plan is irresponsible decisions. They are impulsive and lead to extensive losses. In this regard, you must create a comprehensive plan that includes everything from establishing a proper risk tolerance to deciding the entry and exit points beforehand. When the plan is easily actionable, the trader can move through the volatile market conditions without being affected much. Otherwise, acting without a proper plan can even turn the already generated profits into substantial losses for the traders.

Revenge Trading

One of the most common reasons newbie traders end up with massive losses is revenge trading. Traders who have just entered the market tend to make impulsive decisions. These decisions are fuelled by their intention to recover from a recent loss. When a much-deliberated action doesn’t give them the profit they had planned but leads to a massive loss, it hurts their ego. To satisfy their damaged self-respect, they end up making more irresponsible decisions. 

This further escalates the loss, causing irreparable damage to the trader. Hence, traders should always avoid succumbing to their emotions and sentiments when trading. Instead, they should showcase some patience and grace while trading.

Overexposure

Another major mistake traders, especially new traders, make while making trades is over-exposure. Overexposure refers to using excessive capital while making a single trade. As a result, the chances of a massive loss are augmented with even a slight change in the market. This is why traders must diversify their trades. 

They should also try to limit their exposure to each trade. Careful decisions are required, mainly because the trade market is so volatile.

Being careful of the stop loss orders is hence necessary. This is an essential step in risk management. A proper risk management plan helps traders avoid vulnerable positions. Making even a single irresponsible decision can wipe out a massive chunk of cash from your portfolio. 

Over-trading

Overtrading is also a case of impulsive buying. The trader may get over-excited when the market is high and make a massive trade. However, big trade decisions do not always lead to extensive profit generation. Newbie traders tend to get excited early, even with a small profit, and make excessive trade actions, leading to overtrading. This causes them to go through losses, and their efforts to achieve significant profits quickly usually backfire. Hence, showcasing prudence while making trade transactions is always a good idea and prefer quality over quantity.

Hasty decisions can seriously impact a trader’s portfolio. In the long run, it can also affect his standing in the market and reputation in the prop firm. The trader must be disciplined in his actions so his decisions appear logical and thoughtful to the prop firms. 

Final Thoughts 

Emotions and sentiments can affect the performance of a trader in the market. Being influenced by greed or fear and making decisions leads to massive financial failures. This is why it’s necessary to have a well-prepared strategy to follow, as it helps make sane decisions and avoid poor performance.