Key tips for beginner traders
Many beginner traders often confuse a range market with a trending market. Example one: you buy shares for 5,000 PLN thinking that the market is going up, but in reality, you are in the middle of a range market. After a week, the shares drop by 3%, and you lose 150 PLN. Example two: you try to sell during the declines thinking that the trend will reverse, but the market is actually in a range, and the price rises again. The loss is another 200 PLN due to slippage and spread. Understanding the market structure is key to avoiding such mistakes.
Incorrect market type recognition leads to poor trading decisions. When the market is in a range, prices oscillate between support and resistance levels, and your trend strategies simply won't work. It's like trying to catch a bounce in a place where there is no movement. Similarly, in a trending market, trying to trade against the trend often results in losses because the price movement is too strong.
Assume you have a capital of 10,000 PLN and you lose 3% on each wrong trade. After 10 such mistakes, your account shrinks to about 7,040 PLN. This means you have lost almost 3,000 PLN based on poor market type decisions. Additional costs, such as slippage and unreasonable stop loss settings, can only worsen the situation. With spreads and other transaction fees, your losses can increase by several hundred PLN more.
To avoid losses, first learn to recognize market structure.
Analyze the market daily for the type of structure before making a trading decision.
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