How to avoid traps and gain in trading
Many beginner traders make the same mistakes when opening the London session. The first of these is making hasty trading decisions based on initial price movements, which often turn out to be false breakouts. For example, investing 5,000 PLN in a position that quickly loses 2% of its value means a loss of 100 PLN in just a few minutes. Another mistake is not taking spreads into account, which can be wide in the morning hours, further increasing transaction costs. Ultimately, not using a stop loss or setting it incorrectly can result in unexpected losses when the market suddenly turns against your position.
False breakouts may seem attractive because at first glance they look like the beginning of a large move. However, they often lead to quick reversals that can deplete your capital before you have a chance to react. The spread during the morning hours can further eat into profits or deepen losses, which is particularly dangerous for smaller accounts. Improper risk management and lack of precise stop losses can ruin a trading day in just a few minutes if the market does not move in the expected direction.
Assume you have an initial capital of 10,000 PLN. You decide to take a risky position worth 2,000 PLN with a spread of 0.5% and a false breakout that results in a 3% loss. In such a scenario, you lose 60 PLN on the position value and an additional 10 PLN on the spread. This totals a loss of 70 PLN from one wrong trade. If you repeat this mistake several times a month, your losses could amount to 700 PLN or more, which represents 7% of your initial capital.
To avoid the pitfalls associated with the opening of the London session, apply a few proven strategies. First, before opening any position, wait for the market to stabilize after the first quarter of unpredictable movements. Second, always use well-placed stop losses that protect you from significant losses. Third, monitor the spread and ensure it is narrow enough before executing a trade. Finally, be flexible and ready to change your plan if the market does not move according to your expectations.
Establish and apply the rule of waiting 15 minutes after the session opens before entering the market.
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