What are the mistakes to be avoided?

<p id="isPasted">Avoiding common mistakes in trading is crucial for long-term success, with key errors often stemming from poor risk management, emotional decision-making, and a lack of planning and research.&nbsp;</p><p><strong>Risk Management Mistakes</strong></p><ul><li>Trading without a stop-loss order: Failing to use stop-losses (automatic exit points for losing trades) leaves capital exposed to significant, unforeseen losses.</li><li>Improper position sizing: Risking too much capital on a single trade is a major pitfall. A common rule is to risk no more than 1% to 2% of your total account on any given trade.</li><li>Over-leveraging: Using too much leverage (borrowed capital) magnifies both gains and losses, which can quickly wipe out an entire account, especially for beginners.</li><li>Poor risk-to-reward ratio: Entering trades where the potential loss is equal to or greater than the potential gain (e.g., a 1:1 ratio) is a bad strategy in the long run. Aim for a ratio that compensates for occasional losses, such as 1:2 or higher. </li></ul><p><strong>Emotional &amp; Psychological Errors</strong></p><ul><li>Emotional trading (fear and greed): Allowing emotions like fear (panic selling, cutting winning trades too early) or greed (holding losing trades too long, over-leveraging) to dictate decisions instead of objective analysis.</li><li>Revenge trading: Trying to immediately win back money lost on a previous trade with impulsive, poorly planned trades, which often leads to further losses.</li><li>Overconfidence: A winning streak can lead to a false sense of invincibility, causing traders to abandon their rules and take excessive risks.</li><li>FOMO (Fear Of Missing Out): Chasing trades after a market has already made a significant move due to the fear of missing potential profits, often resulting in entering positions at market peaks. </li></ul><p><strong>Planning &amp; Research Shortcomings</strong></p><ul><li>Trading without a plan: Entering the market without a clear, written trading plan (defining entry/exit points, risk limits, and position sizing) is essentially gambling.</li><li>Insufficient research: Relying on gut feelings, rumors, or tips from others rather than conducting thorough fundamental and technical analysis of the market or stock.</li><li>Overtrading: Taking too many trades in a short period, often out of impatience or boredom, which increases transaction costs and exposure to risk while reducing focus on quality setups.</li><li>Not using a trading journal: Failing to document and review past trades (both winners and losers) prevents learning from mistakes and identifying recurring patterns in behavior or strategy. </li></ul>