Technical Analysis

Common Mistakes To Look out for In Technical Analysis

Wed May 26 2021 14:14
Technical analysis can be daunting for beginners and even for many advanced traders. With so many things to watch out for, it is easy to make mistakes in TA. But, it becomes prominent to avoid common mistakes that can hinder capital. 

No matter how many years a person has been trading, one mistake can ruin everything. So, to ensure that you don't repeat a common mistake like others, we have done the research. In this article, we will look at all the mistakes that may look obvious but can cause serious damage to your money. 

There are several aspects of technical analysis that look easy to master, but it is the case. So to stay in the market longer, read and avoid these mistakes.

Ignoring the loses 

The first golden rule in technical analysis is to cut your losses. Many beginners make the common mistake of not managing financial loss properly. Managing a loss seems easy, but in reality it is not. When it comes to trading, it is more important to save the capital than to risk it for profits. 

Avoid the mistake of making big profits by risking your capital in the stock market. To avoid this mistake, do the technical analysis first and be sure of it. While placing your trade, always invest a very small portion of your portfolio. It is because the market is impossible to guess, and it can help reduce the losses. 

If after placing a few trades you find that you are going into the red, it is time to change your strategy. You need to stop at that level and start checking where you made a mistake that cost you a loss. 

Doing overtrading 

Overtrading under the label of "active trader" is the second common mistake. You need to stick to your plans when it comes to how much you need to trade in a day. It often happens that when a trader keeps winning, he starts overtrading. 

The key point here is that the market is very volatile and trends turn around in no time. So, to protect and grow your capital, you should always avoid overtrading. It is not important to be active in the market all the time and risk capital. 

On the other hand, it is best to only take advantage of the best opportunities to make money. Don't get carried away by the fear of missing out on situations - they always bring losses. Especially if you are a beginner with limited capital, follow this rule and play a steady game. 

Trading for revenge 

Revenge trading is trying to recoup big losses from past trades. It is a very common mistake that, when it goes wrong, costs a large amount of money. Revenge trading is full of risk and even if the market is in your favor, you can end up in big losses. 

The main reason that leads to revenge trading is emotions. It is very difficult to stay calm when you suffer a big loss or even a small loss. And that is when most traders lose control and place a bigger and dangerous trade. 

To avoid this mistake, you need to keep your emotions aside while trading. Always think analytically to deal with losses. Many traders will encourage you to take bigger risks, but it is always better to avoid them.

Inability to make a change 

It is a very big factor that many traders refuse to change their trading style. They become very stubborn with their trading approach and they ignore everything. 

The key to becoming a successful trader is to be flexible in your approach to trading. If one technical analysis strategy is not working, switch to another. Market conditions change in a very short period of time and there is no single strategy that will last for all time. 

It is always okay to keep your profit target rigid, but you need to keep the approach to that target flexible. Instead of sticking to just one strategy, you can try many first and then choose the one that is most beneficial for you. And, to decide which technical analysis strategies are effective, you need to study. 

Instead of denying failure, it is best to observe what went wrong when placing the trade. With this mindset, it's easy to avoid this common mistake of being stubborn. 

Trading in unfavorable conditions 

As a trader, you should have a sense of when not to trade and protect your capital. Many people make the common mistake of trading in very unfavorable conditions. This will not only eat up your capital but also mess up your entire portfolio. 

Always use tools like RSI to check the momentum of the market and only then place the trade. And, if the market has changed direction due to external news, you need to be aware of it. It is better to stay away from such volatility. 

Following other traders 

Even if two traders place the same trade on the same stocks, there is a possibility that the results will be different. Learning from others and improving trades is a different thing than copying. 

But, copying others without taking a second thought is wrong and a common mistake. So, even if you are trading by copying strategies, make sure you check it with your trading parameters. Also, don't approach a trader's strategy without fully researching it. 

Always keep your trading psychology on track and stick to your research even if you are copying.

Not observing trends 

It is not necessary that the tactics that worked yesterday will work in the market today. The stock and forex market is very volatile and you have to keep improvising the trends based on the market. 

Along with your technical analysis strategies, always keep an eye on the fundamental analysis as well. By doing this, you can mitigate your risk to some extent, so it is a good practice. Keeping up with the market helps in a number of ways and also improves your odds. 

Many people make the mistake of ignoring the trends and placing the trades. Technical analysis is all about watching the probabilities in the market. Always try to look for good winning opportunities and avoid trading against the trends. 

Stop learning 

This common mistake is same in all forms of trading and also in other work. After spending a few years or even months in the market, people stop learning. This is the biggest mistake anyone can make, thinking they know everything. Even experienced traders like Warren Buffet spend a lot of time every day learning new things. 

To become a successful trader, you should not stop learning and keep honing your skills. In the long run, it will bring you good results, both financially and in terms of your personal growth. So, no matter what your portfolio looks like, keep exploring new opportunities. 


It's easy to avoid technical analysis mistakes if you follow trading tips. Whether you are a beginner or an advanced trader, these tips will protect you. Besides avoiding these mistakes, you can also use tools to improve your trading. With our forex trading signals, you can improve your trading and increase accuracy.

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