What are the 3 biggest mistakes of trading derivatives?
Learning from other people’s mistakes can save you a lot of time, and more certainly, it will save you a lot of capital. Here we have summarised the Top 3 mistakes made by derivatives traders, and more importantly, how to avoid them.
Mistake 1: Trading without a trading plan
Every trader needs a trading plan. If you don’t have one, it’s time to get one and the best place to start is by thinking about why you’re trading.
Is it because you want to earn a bit of extra money on the side of your regular job?
Do you want to make a career of tracking the market?
Or is it just something you are doing for a challenge?
Whatever the reason may be, the goals will help determine the way you trade.
The trading plan should contain a strategy, time commitments and the amount of capital that you are willing to invest.
Mistake 2: Over leveraging
As we know, leverage can be a double-edged sword. It can amplify both winning and losing trades.
If you use a high level of leverage and the trade turns against you, this could result in a total wipeout of your trading capital.
So the best way to use leverage is to start low. Try using the lowest level of leverage offered by derivatives trading DEX. Once you are more comfortable with how leverage works, then you can increase the leverage level if you like.
Mistake 3: Over Expectation of returns
Many traders enter the derivatives market believing that this is a money-making machine. We cannot say this expectation is wrong. But it is wrong to expect this to take place very fast.
It’s possible to make money in the derivatives market, but you will have to be patient and persistent.
There is another advantage to not over-expecting the returns: If we do not expect very high returns, we will not take big risks in this market. Many traders take such big risks and end up losing their money. Therefore, traders need to rationalize their return expectations.
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