Articles and guides

Three practical reads for anyone starting out: the mistakes that cost people money, how manual and automated trading really differ, and the psychology that decides how people behave when markets move. All are information only and not investment advice.

6 minute read

Common mistakes in trading

Most losses among new traders come from a short list of repeated errors rather than from bad luck. Knowing the list will not make you immune, but it makes the mistakes easier to spot in yourself.

Trading without a plan

Opening a position because a price is moving, with no idea of when you will leave, is the commonest error. A plan states in advance how much you will risk, what would make you exit with a loss and what would make you take a gain. Without one, decisions are made in the middle of a price swing, which is when judgement is worst.

Risking too much on one idea

Putting a large share of your money into a single asset or a single trade means that one bad move does lasting damage. Many experienced traders limit what they risk on any one position to a small fraction of their total. The exact figure is personal, but the principle of limiting it is not.

Chasing losses

After a loss, the urge to win it back quickly leads to bigger bets at worse moments. Accept that losses happen, stop for a day if you feel emotional and never borrow money to recover a loss.

Following the crowd

Buying because everyone is talking about an asset usually means buying near the top of the excitement. Social media posts are not research, and some are paid promotions. Check claims against independent sources.

Ignoring costs and tax

Commissions, spreads and conversion charges add up, especially for frequent trading. Gains may also be taxable in the UK. Keep records from the start so you are not reconstructing them later.

7 minute read

Manual trading or automated trading?

Neither approach is better for everyone. The right one depends on your time, temperament and how much you want to understand each decision.

ManualAutomated
Time neededHigh, markets run all dayLow once configured
ConsistencyVaries with mood and tirednessApplies the same rules each time
SpeedLimited by attentionReacts in seconds
FlexibilityCan adapt to unusual eventsOnly as good as its rules and data
Main riskEmotional decisionsFaulty settings repeated at speed

A manual trader can read a surprising headline and decide to stay out of the market for the day. An automated system will carry on according to its instructions unless it has a rule to pause. On the other hand, a system does not get bored at 3am, does not panic after three losses and does not forget to close a position.

Automation does not remove the need to think. Someone still has to choose the strategy, size the risk and check on results. The sensible way to think about it is as delegating execution while keeping responsibility for the plan. Whichever route you take, losses are possible.

6 minute read

The psychology of the trader

Markets are made of people, and the person you are most likely to be fighting is yourself. A few well-documented tendencies explain much of the poor decision-making seen in trading.

Fear and greed

Fear makes people sell after prices have already fallen, locking in a loss, and greed makes them buy after a rapid rise because they do not want to be left out. Both feel like good judgement while they are happening.

Loss aversion

Losing hurts roughly twice as much as an equal gain pleases. That pushes people to hold losing positions too long in the hope they recover, and to sell winners too early to feel safe.

Overconfidence

A few good results can persuade a beginner that they have a special skill. In a volatile market luck and skill are hard to separate, and overconfidence leads to larger positions just before conditions change.

Habits that help

  • Write the plan before you trade and follow it.
  • Decide your maximum loss in advance and treat it as fixed.
  • Check your accounts at set times, not constantly.
  • Review your activity reports each month and note what you would do differently.
  • Take a break after a big win or a big loss before making the next decision.

Ready to look at the practicalities? Read Getting started, or study the Risk disclosure first.