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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Trading Mistakes: taking your winners too early and letting the losers run too far

IG client Kassar Khan discusses the psychology of maximising your opportunity as a trader.

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Khan says the tendency is to take profits too early, rather than let them run.

Conversely, inexperienced traders either allow losses to run too far in the belief that at some point the trade will flip back in their favour, or worse still, add to the losing position in the belief that they will make it all back and more.

(Video summary)

Trading mistakes to avoid

In this video series, IG client Kassar Khan shares his trading mistakes, providing valuable insights for beginners in the trading world.

One of his major blunders was holding onto losing trades for too long while cashing out early on winning trades. This created an imbalance and resulted in a low success rate overall.

Kassar admits that overcoming this issue is a daunting task that often requires experiencing significant losses before regaining composure. As someone who taught himself the ropes of trading, Kassar had to face these challenges by himself. While he could have sought advice from other traders, he firmly believes that each person has their own unique strategy and approach. Therefore, he emphasises the importance of dedicating time to independently develop techniques to conquer these obstacles.

Adjusting stop-loss orders

Kassar highlights a common mistake of adjusting stop-loss orders when trades are close to hitting their stop levels. Initially, traders may feel relieved that they have managed to alter their risk, only to discover that this tactic is ineffective. Out of ten trades, perhaps only one will turn in their favour, giving them a false sense of accomplishment.

However, this method often leads to unpredictable outcomes. For instance, trades that were initially meant to risk £1,000 and take a £3,000 profit can end up becoming £4,000, creating an imbalanced risk-reward ratio. When such trades eventually bounce back in their favour, traders may find satisfaction in pocketing a £1,000 profit. Unfortunately, this positive outcome is short-lived because the next loss could be much higher, resulting in an overall deficit. Kassar warns against falling into this pattern, as it can lead to catastrophic losses or a significant depletion of one's trading account.

The pursuit of recovering these losses through a single high-stakes trade is essentially gambling and unlikely to be successful. Contrary to popular belief, trading more frequently is not the solution. According to Kassar, trading smart and focusing on quality over quantity is the key. He advises against being swayed by the fear of missing out and stresses that losses are a normal part of trading. By accepting the risk of a predetermined amount, embracing losses, and eventually hitting a major winning trade, traders can effectively cover those losses.

However, allowing losing trades to linger indefinitely creates an unrealistic desire for a massive victory, which can ultimately lead to complete wipeout or substantial losses of one's trading account.


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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