Technical analysis (TA) is one of the most used ways to analyze the financial markets. TA can be applied to essentially any financial market, whether that’s stocks, forex, gold, or cryptocurrencies.
While the basic concepts of technical analysis are relatively easy to grasp, it’s a difficult art to master. When you’re learning any new skill, it’s natural to make a lot of mistakes on the way. This can be especially harmful when it comes to trading or investing. If you are not being careful and learning from your mistakes, you risk losing a significant portion of your capital. Learning from your mistakes is great, but avoiding them as much as possible is even better.
This article will introduce you to some of the most common mistakes in technical analysis.
So, what are the most common mistakes beginners make when trading with technical analysis?
1. Not cutting your losses
Let’s start with a quote from commodities trader Ed Seykota:
"The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you can follow these three rules, you may have a chance.”
This seems like a simple step, but it’s always good to emphasize its importance.