No trader gets it right every time. We all make occasional mistakes, and that’s nothing to be ashamed of – in fact, it’s often a good way to learn.

However, you can reduce your risk of blunders by being aware of the pitfalls that frequently catch out other traders. In this section we’ll run through some of these common errors, so you can learn from the mistakes of others and steer clear of them yourself.

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Insufficient preparation

As Benjamin Franklin said, ‘By failing to prepare, you are preparing to fail’. And in the world of trading such failure can cause significant financial pain, so it really does pay to do your homework before you venture into the markets.

• Use the host of resources available – books, courses, trading conferences, the internet – to keep yourself informed about the latest trading ideas and techniques
• Take your time to understand the markets that interest you, how they work and how they’ve been behaving
• Create a trading plan to suit your trading goals, your skills and knowledge and your feelings about risk
• Practise trading using a demo account, where you can get comfortable with using your trading platform and try out strategies in a safe environment

You may know of some experienced, successful traders who make it look easy. But unfortunately trading is not just a case of opening a position and waiting for the profits to roll in – a degree of skill and knowledge is essential.

Too many new traders rush in with misguided confidence and are punished for it by the markets. Don’t be one of them.

Not following a plan

Suppose you needed to travel from Edinburgh to New York: would you just step out of the door and set off without researching your route or checking ticket availability? Without doing a little advance planning, you would be unlikely to arrive at your destination.

In the same way, heading into a trade without having a plan can get you into trouble.

In the ‘Planning and risk management’ course, we talked in detail about how to create a trading plan. Once you’ve done that, it’s important to stick to the course you’ve plotted for yourself.

You may be tempted, every day, to ignore your trading plan and just stay in a little longer on this trade or go in heavy on that one. But if you’ve really taken the time to develop your trading plan then you should have faith in it being the best-suited approach for you.

Even the best trading plan remains only a guide, but the better the guide, and the better you can follow it, the better your chances of success in the long run.