6 Mistakes Even Experienced Traders Make

There’s nothing easier than attributing a mistake to one’s inexperience. It’s simple and logical, and everyone can understand it. However, even some of the most experienced traders make these mistakes from time to time. 

The way this works is pretty straightforward – even experienced traders forget things, get outpaced by the changes within the industry, or just grow overconfident. After all, if there’s a step of precaution that you take every time and things never blow back in your face, you’ll start feeling like you’re just wasting time and resources. 

It’s like paying for insurance without actually needing it. With this example, however, it’s clear that it’s a necessity. With these other precautions… not so much.

So, here are six mistakes that even experienced traders make, why they make them, and how you can use this knowledge to avoid them.

1. Overtrading

Trading more will not earn you more by default. Making more trades in a day is not going to increase the rate at which you make a profit. Making a single successful trade and a single unsuccessful trade is the same thing as making ten successful and ten unsuccessful trades (provided that the values are the same or proportionate).

However, what overtrading does is make you feel overexerted.

Also, sometimes, these trades come with extra fees and costs, which means that you’ll end up paying more in these fees than you normally would.

If these trades are all risky, chances are that you’re not even diversifying your resources the right way.

Also, if you’re making more trades, you’re definitely not taking your time to research them all. You don’t have the time to pull all your standard decision-making practices, etc. 

The bottom line is that you need to control yourself and pace yourself. Only make as many trades as you can follow at one time. Stretching yourself too thin will always have the same effect, no matter what you do.

2.  Not researching constantly

The biggest problem with research is that it’s never a one-and-done thing. Things are always changing, especially if you’re buying assets in fields as dynamic as crypto.

Let’s say you’re interested in buying NFTs. This is a relatively new and volatile market, which, although it comes with its own set of risks, also means that it brings a higher potential reward. The problem is that everything about it changes on a regular basis. Therefore, you need to keep looking up the list of NFTs ranked by sales volume, their trade value, etc., on a regular basis. Otherwise, you’re out of the loop.

If you’re investing in stocks, you need to be in touch with all the businesses whose stocks you own. Fortunately, in this day and age, you can automate the messages and notifications that you receive. This way, you’ll be notified right away when something’s up.

Also, make sure that you keep track of new regulations. Sure, trading and investing are as old as civilization, but digital assets and trading platforms aren’t. 

3.  Not diversifying the right way

You’re diversifying your assets to protect them; however, what does diversification even mean in this context? While buying different assets is important, you also want to buy different asset types, as well.

You want assets that have a naturally low correlation with your main investment. For instance, when buying stocks, you want to get some risky shares, but you also want to keep a lot of money secure in S&P 500 companies. Ideally, you could even find some that pay dividends and ensure that you get some passive income going, as well. 

Ideally, however, you wouldn’t keep all the money in the same asset type. Getting some commodities (like gold and silver), real estate (or real estate investment ETFs), and, of course, some cryptos. 

You never really know what’s going to pay off, so just play it safe and don’t keep all your eggs in one basket. This is a mistake that slips from a lot of people’s minds. 

4.  Emotional trading

For a lot of people, trading is more than just a financial transaction. It’s a field where they have the opportunity to show their ability and prowess. They also don’t want to be the only ones left behind (FOMO). 

In other words, instead of being governed by reason, they allow emotions to lead them astray. 

This sometimes gets worse the more experienced they get. How? Well, because they allow their ego to take over. Just think about it – making a miscalculation as a first-time trader is expected. There’s no shame about it. In fact, there’s no reason why you should ever be ashamed of miscalculating a trade or an investment. 

Then, you can also allow your superstitions to guide you. For instance, you can start making assumptions (fallacies) about the way things are supposed to work. You won the last three times so you’ll win the next time, as well. You lost money on your last four trades, so the fifth one has to be in your favor. Just remember, this is how a gambler acts – not a trader.

5.  Confirmation bias

A lot of people don’t care about the truth – they just want to hear that they’re right.

This is how they pick their sources and how they get informed. When they join a community, this is often an epistemic chamber where they’re exposed to a single type of information that constantly confirms their thoughts and ideas. 

Just try it out. Google “The reasons why investing in crypto is a good idea.” It’s certain that you’ll get a load of amazing posts with compelling arguments, some of the best out there. Now, try doing the opposite and try googling “Reasons why investing in crypto is a horrible idea.” You’ll get arguments that sound just as good.

The problem is that almost every post has an agenda, so even if you look up something neutral (in a question format, for instance), you still won’t get exactly what you’re looking for. 

To avoid this, try your best to check opposite sources and try to create an insight. 

6.  Ignoring new trends and technologies

In the past, you had to rely on your broker to find out about new information and access great deals. Today, you can do this on your own from your phone.

Now, imagine a person who believes that the internet is just a gimmick and prefers to use their phone to contact their broker and read about the latest deals from the sheets. It sounds ridiculous, right? After all, what kind of a person would ignore something that gives them that big of an edge? Well, there were and still are a lot of people with this kind of mindset.

O.K., maybe they’re not avoiding the internet, but what about other technologies? For instance, are you trading? If you are, have you already checked out the concept of robo-advisors? If not, why not? Judging by the latest numbers, this is the “next internet,” as far as the world of trading is concerned, yet you’re missing out on it.

There are new technologies every day. Sure, some of them are safe to ignore, but others are really useful. Don’t ignore them.  

Trading and investing are not just down to sheer luck

Sure, there are a lot of factors that you can’t know, can’t affect, and can’t influence. However, how come some people make a living trading and others can’t? The truth is that it has a lot to do with your mindset. With experience, your mindset can be shaped and steered in the right direction but the experience alone isn’t enough.