5 min
Most new traders lose money for the same handful of reasons, and none of them are analytical. These are the seven errors that account for the majority of early losses. Updated September 2026.
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Updated October 23, 2026
Most new traders lose money for the same handful of reasons, and none of them are analytical. These are the seven errors that account for the majority of early losses. Updated September 2026.
Trading without a tested strategy
Ignoring stop loss and take profit orders
Poor position sizing
Trading without emotional control
Overtrading and chasing moves
Not tracking performance
Ignoring scheduled news and economic events
A strategy defines entry conditions, exit conditions and risk management. Without one, trades are taken on impulse and the reasons behind them cannot be reviewed afterwards.
Trading plan what to include
Start by defining rules based on what has worked historically, then backtest them: apply the rules to past price data and record the outcomes.
This process produces two things: a set of rules with evidence behind them, and the discipline that comes from having something specific to follow.
A stop loss caps the loss on a trade. A take profit extracts the gain at a predetermined level. Without the first, losses escalate. Without the second, winning positions are held until they reverse.
2. Ignoring Stop-Loss And Take-Profit Orders
Exit rules must be set before entry and followed during the trade. Changing them mid-position defeats the purpose, because the alteration always happens in the direction of hope rather than analysis.
Review after 30 or more trades to assess whether the rules work. Not after three, and not during a losing sequence.
Position size is determined by the distance between entry and stop loss, combined with how much of the account you are willing to risk.
3. Poor Position Sizing In Trading
The standard is to risk no more than 1 percent of the account balance on a single trade. An earlier version of this article stated the opposite through a typographical error, and the correct rule is a maximum rather than a minimum.
A worked example. A trader with a 10,000 dollar account risking 1 percent can lose 100 dollars on a trade. Buying at 10 dollars with a stop at 9.75 means risking 0.25 per share, so 400 shares is the correct size: 400 multiplied by 0.25 equals the 100 dollar limit.
Note that the position costs 4,000 dollars to open while risking only 100. Those are different figures and confusing them leads to oversized positions.
Greed and fear drive most poor decisions. Professional traders have learned to manage them, and the management is procedural rather than a matter of willpower.
6. Trading Without Tracking Your Performance
4. Trading Without Emotional Control
It starts from accepting that no strategy wins every time and that any individual trade can lose. A loss following the plan is a cost of doing business, not evidence the plan is wrong.
During a session, when emotion rises, pause and breathe before acting. The impulse to do something immediately is the signal to do nothing for a moment.
Wanting to trade constantly, trying to catch every move, or fearing a missed opportunity all produce the same result: trades taken outside the strategy.
A trader's job is to follow their strategy, not to participate in every price movement. Being flat when conditions do not match your criteria is correct behaviour rather than a missed opportunity.
Without a record, mistakes repeat invisibly. A journal recording each trade, the reasoning behind it, and the outcome makes patterns apparent that are impossible to see from memory.
On review, separate two categories that look identical in the results: losses that followed the plan, which are a normal cost, and losses caused by deviating from it. Only the second needs fixing, and without a record the two are indistinguishable.
Scheduled releases move markets sharply. Holding a leveraged position through an interest rate decision or major economic print means accepting a risk you did not analyse.
7. Ignoring Market News And Economic Events
7. Ignoring Market News And Economic Events
Check an economic calendar before the session and set rules for major events: either close beforehand, reduce size, or stay out entirely. Decide in advance rather than during.
Position sizing first, it determines whether you survive the other mistakes
Stop losses second, they make position sizing calculable
A tested strategy third, so the discipline has something worth following
Journalling fourth, so the first three can be verified rather than assumed
Emotional control and overtrading follow from the above, they are symptoms more than causes
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No more than 1 percent of your account balance. On a 10,000 dollar account that is 100 dollars maximum loss per trade.
Divide your maximum acceptable loss by the distance between entry and stop. A 100 dollar limit with a 0.25 stop distance gives 400 shares.
After 30 or more trades, not after three and not during a losing sequence. Small samples show noise rather than performance.
Without a record you cannot distinguish losses that followed the plan from losses caused by breaking it. Only the second category needs fixing.
Decide in advance: close beforehand, reduce size, or stay out. Holding a leveraged position through a scheduled event means accepting unanalysed risk.
Position sizing. It determines whether the other mistakes are survivable or account-ending.
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