Six Major Causes of Trading Losses Revealed: How to Respond? Quickly Learn the Art of Correct Ordering

In trading markets, many people experience losses during correct market conditions, even significant losses. This is often because they don’t know how to place orders properly, opening positions at inappropriate prices and executing trades poorly. The result is either being trapped or taking losses, and with a bit of luck, breaking even or earning a small profit, but wasting opportunities and market movements in the process. Therefore, correct order placement is not only an art but also a necessary condition for ultimately making money.

【Common Mistake 1】: After a sharp price drop and a strong rebound, you worry about missing the move, even thinking the rebound signals a bull market. Afraid of missing the bull run, you chase the rally and open a long position.

Result: Lucky traders might make some money, but unlucky ones, facing a significant pullback, get trapped. If the market falls again after the rebound, they get caught. If the market continues to decline after the fall, it can lead to a collapse, resulting in large losses.

Proper approach: If you miss the bottom near support levels, continue to miss it. Such rebounds can reverse at any time, so patience is key until a clear stabilization signal appears.

【Common Mistake 2】: After the market turns bearish, the price stabilizes near support but hasn’t confirmed a bottom yet. It fluctuates repeatedly, sometimes rising, sometimes falling. Unable to bear the boredom, you finally place an order to sell.

Result: Small profit or small loss, but you are unwilling to close the position. If luck is on your side and the market moves in your favor, you might make some money. However, if the market quickly reverses, your profits are wiped out instantly. If luck is bad and the market moves against you, you get trapped. If the market continues in the wrong direction, large losses can occur.

Proper approach: Wait and observe, patiently until the volatility subsides and a clear trend emerges.

【Common Mistake 3】: After a bullish trend begins, continuous rises make you regret missing out. Watching the price keep climbing, you finally chase the rally and buy in.

Result: Just after you buy, the price starts to fall, trapping you at the peak.

Proper approach: Do not chase the rally. Wait for it to rise further—possibly sky-high! Then, when the price stalls and begins to fall, open a short position. In such cases, large traders often have already set up short positions, ready to dump when the price stops rising, crushing both spot and futures markets. Take profits from the bull run and turn them into short-term gains.

【Common Mistake 4】: After the market turns bearish and declines sharply, you see that the bulls are struggling and miss the shorting opportunity. Finally, you place a short order.

Result: Lucky if you earn a fee; unlucky if the bulls suddenly rebound near support, causing a margin call and liquidation. The worst part is, after your liquidation, the bulls quickly weaken, and the market continues downward, leaving you crying.

Proper approach: When the market enters a bearish phase, the best time to open a short is not at the lowest point of a continuous decline but at each rebound’s high point. The optimal short entry is near resistance levels.

【Common Mistake 5】: The market enters a consolidation phase, with prices repeatedly rising to the upper boundary of the range and falling to the lower boundary. You buy long at the upper boundary or short at the lower boundary.

Result: Getting liquidated!

If you buy long at the lower boundary and profit, but do not close the position, the price quickly swings back to the lower boundary. Conversely, if you short at the upper boundary and profit, but do not close, the price quickly swings back to the upper boundary.

Result: All your efforts go to waste.

Proper approach: During sideways markets, open short positions near resistance levels and long positions near support levels. Take profits promptly. Sometimes, prices may not reach the exact boundaries, so do not wait until they do to close; instead, close when the momentum in the opposite direction weakens.

【Common Mistake 6】: During a sideways period, you wait too long, feeling an explosion is imminent, and then place an order to enter.

Result 1: The market continues to consolidate for months or even years. You neither lose much nor gain much, just wasting time. Seeing other assets rise, you worry about selling this one, which then suddenly surges, causing you to hesitate.

Result 2: When a decline inevitably occurs, you buy in just before the drop, get trapped, and can’t bear it, so you cut losses. Then, the price suddenly surges, and you regret missing out. When it drops again, you get trapped once more.

Proper approach: In long-term sideways markets, signals usually appear before a breakout—either a sudden drop to trap traders or a quick rise followed by a decline to shake out weak hands. Only enter after such signals appear.

As discussed earlier, incorrect order placement and proper strategies are also crucial in major market bottoms and short entries.

【Support Level Longs】:

When the price rebounds at a support level, observe the rebound strength. If the rebound is weak and the price fluctuates repeatedly at the support, sell promptly. If there’s a strong rebound, sell when the upward momentum exhausts and the price stops rising.

If the market is in a strong bear trend, all bottom-fishing at support levels should be quick in and out, because new support levels can form the next day as data changes.

【Resistance Level Shorts】:

When the price hits resistance and pulls back, observe the pullback strength. If the pullback is weak and the price fluctuates repeatedly at resistance, close the position promptly. If a sharp decline occurs, close when the decline exhausts itself or near support levels.

If the market is in a bull trend, all short positions at resistance levels should be quick in and out, as new highs can form the next day, raising resistance levels further.

Sometimes, resistance/support levels can be temporarily broken due to strong opposing orders (sudden large buy or sell orders). These temporary breakouts often revert. Once the price returns, close the position quickly and move to the next support or resistance level.

Finally, a reminder: no matter what the market condition, never fully commit all your funds! Full positions can change your mindset and increase pressure.

**$LIGHT **$LAB