TL;DR
Breaking News: Technical Analysis is Challenging! Once you've traded for a short while, you'll understand that making mistakes is part of the game. In fact, no trader can avoid losses—even experienced traders who make fewer mistakes.
Nevertheless, almost every novice makes some basic errors when starting out. Top traders always maintain an open mind, rationality, and calmness. They understand their strategies and continuously interpret the market's signals.
To succeed, you must do the same! By cultivating these qualities, you can manage risks, analyze errors, leverage your strengths, and continuously improve. Strive to be the calmest person in the arena—especially when the situation deteriorates.
Now, let's look at how to avoid the most obvious mistakes!
Introduction
Technical Analysis (TA) is one of the most mainstream analysis methods in financial markets, applicable to almost all markets—including stocks, forex, gold, or cryptocurrencies.
Although the basic concepts of technical analysis are relatively easy to understand, it is an art difficult to master. Making mistakes is inevitable when learning any new skill, but in trading or investing, the consequences can be particularly severe. Without careful action and learning from mistakes, your principal could significantly shrink. While learning from errors is valuable, avoiding mistakes is the best strategy.
This article will introduce the most common errors in technical analysis. If you are a trading novice, you might want to first understand the basics of technical analysis? Please read 'What is Technical Analysis?' and 'Top 5 Core Indicators of Technical Analysis'.
So, what are the most common mistakes novices make when using technical analysis for trading?
1. Not Setting Stop Losses
Let's start with a quote from commodity trader Ed Seykota:
"The elements of good trading are: (1) cutting losses, (2) cutting losses, (3) cutting losses. If you can follow these three rules, you may have a chance."
This seems simple, but its importance cannot be overstated. In trading and investing, protecting capital should always be the first priority.
Trading can be intimidating for beginners. Novices might consider the following robust strategy: the first step is not to profit, but to avoid losses. This is why starting with small positions, or even without real funds, can be more beneficial. For example, Binance Futures offers a test network where you can verify strategies before risking your hard-earned money. This protects your capital and allows you to invest real money only after consistently producing good results.
Setting stop losses is fundamentally rational. Every trade should have a point of failure—a moment when you need to "accept defeat" and recognize that your trading concept is wrong. Without this mindset, long-term success is difficult. Even one bad trade can severely damage your portfolio, potentially forcing you to stubbornly hold losing positions, futilely waiting for market recovery.
[The translation continues in the same manner for the rest of the text, maintaining the original structure and meaning while translating to English.]By carefully reading interviews with successful traders, one will find that their strategies are often vastly different. In fact, a strategy that is perfect for one trader might be considered completely unfeasible by another. There are countless ways to profit in the market; you just need to find the one that best suits your personality and trading style.
Trading based on others' analysis may occasionally yield results, but blindly following without understanding will inevitably lead to long-term failure. This does not mean you should not learn from others; the key is whether you agree with the trading concept and if it fits your trading system. Even if the other party is experienced and renowned, you should not blindly follow.
Conclusion
We have discussed the fundamental errors that should be avoided when using technical analysis. Remember that trading is not easy, and approaching it with a long-term mindset is usually more viable.
Becoming a consistently profitable trader requires time to accumulate experience. This demands perfecting strategies through extensive practice and learning to develop your own trading approach. Only then can you discover your advantages, recognize your weaknesses, and truly master your investment and trading decisions.
