FXTM information and reviews
OctaFX information and reviews
XM information and reviews
FXCC information and reviews
HFM information and reviews
FxPro information and reviews

Common Knowledge is a Trading Trap

It is no secret that trading can be just as risky as it can be profitable. Many amateur traders dive into it without a proper plan or strategy in place, which costs them lots of money. But an even bigger mistake they can make is blindly trusting common knowledge and thinking that it is enough to ensure profitable trades. In this article, we will discuss what common knowledge in trading is, how it can be detrimental to traders, the most frequent traps traders fall into, and tips for avoiding trading traps.

Key Takeaways

Traders can avoid these traps by paying more attention to the current market conditions, having a detailed risk management plan, not relying on their predictions alone, and being flexible with their trading strategy.

What is Common Knowledge?

To put it simply, all the information new traders learn before starting trading is considered common knowledge. This includes various strategies, patterns, indicators, and other tips and tricks you can usually pick up from various courses and guides for beginners. This information is important, there is no denying that. But oftentimes amateur traders accept it as an indisputable fact without realizing that nothing is definite in trading and these patterns and strategies they rely on to predict future price movements don’t really guarantee that the market is going to move in their favor. But why this happens is what we are going to look into next.

How can Common Knowledge be a Trading Trap?

There are multiple reasons common knowledge can become a trading trap. As a rule, common knowledge relies heavily on the idea that market movements can be predicted. But in reality, it is not true. The thing is, it is mainly used by individual traders that have a very limited amount of money to trade. So their trading decisions do not really affect the movement of the market. But what does affect the market is the decisions of big financial institutions with enormous amounts of capital to spare. They are the ones really controlling the movement of asset prices, and no common knowledge can help you really predict their next move.

Another reason is that trading is essentially an opposition between buyers and traders, who try to benefit from the same market conditions. If one party wins, the other is going to lose. They use the same strategies and tools, watch for the same patterns; yet, this common knowledge helps one party and traps the other.

This shows that a trader’s success can’t be attributed to their ability to apply common knowledge in practice. Rather, it depends on other factors and behaviors that a lot of traders overlook while making their decisions.

Common Mistakes and Traps in Trading

Tips for Avoiding Trading Traps

Here are some tips for how you can avoid these trading mistakes and traps:

Bottom Line

Common knowledge can help amateur traders understand the basics of trading, but it isn’t a good idea to rely solely on what you learned from your beginner’s course. Make sure to pay attention to how the market actually moves instead of sticking to your predictions, have a good risk management strategy in place, and you can avoid the most common trading traps and mistakes.


Share: Tweet this or Share on Facebook


Commodity Trading and its Role in Energy Transition
Commodity Trading and its Role in Energy Transition

The global energy landscape is rapidly transforming, driven by the need for sustainable and cleaner energy sources. The challenges of this energy transition are vast and complex...

New York Stock Exchange (NYSE): Defined & Explained
New York Stock Exchange (NYSE): Defined & Explained

The New York Stock Exchange (NYSE) appeared 231 years ago, immediately changed the US market, and became the largest marketplace for buying and selling assets in the world...

Exchange Traded Funds (ETF) - Meaning, Types, Benefits
Exchange Traded Funds (ETF) - Meaning, Types, Benefits

ETF funds may become a good alternative to stocks for those who have just turned their attention to earning on the stock market. We have decided to find out what ETFs are worth choosing...

Copy trading: tap into the knowledge of top-performing traders and earn money
Copy trading: tap into the knowledge of top-performing traders and earn money

To be a successful Forex trader, you need to have extensive experience and knowledge of financial markets. But what if you are a novice trader who is just getting started?

Why trade indices?
Why trade indices?

Indices trading is the trading of Contracts for Difference (CFDs) on a stock market index. This is what we’ll be examining in this article. If you ask why trade indices let’s find it out...

Why trade futures?
Why trade futures?

In this article, we’ll be taking a deep dive into the future. We’ll touch on the types of assets that can be traded using futures, and the advantages and general why trade futures from the global traders...

Editors' Picks

FXCM information and reviews
MultiBank Group information and reviews
MultiBank Group
RoboForex information and reviews
Libertex information and reviews
Vantage information and reviews
FP Markets information and reviews
FP Markets

© 2006-2023 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.