By Allen 
Trading can take a toll on emotions. In critical moments, traders often make various emotional mistakes that can lead to significant losses and failures.
Newly ventured into the trading realm? Unsure of what emotional mistakes are common while trading? If so, stay with us to check out seven common emotional mistakes, what they cost you, and how to avoid them…
Fear of Missing Out (FOMO)
FOMO takes place when traders – driven by panic and herd mentality – jump into quickly rising assets without proper analysis. It’s because they are afraid of missing a huge profit.
The Cost – In case you buy at the peak just before a market correction, you may incur immediate, substantial losses.
To avoid this, it’s advisable to stick to a predefined trading plan and accept that there will always be another opportunity to profit.
Revenge Trading
Experienced a loss? But still, make another trade? It’s often driven by frustration and desparate need to recoup losses.
The Cost – Oftentimes, it results in impulsive, high-risk trades that lead to even larger, sometimes fatal, hard-to-recover financial losses.
To avoid this common mistake, you should take a mandatory break after a loss. Calm yourself down and regain emotional control.
Holding onto Losing Trades (Hope & Fear)
Several traders refuse to accept that a trade they made is wrong. They hold on to losing positions in the hope that the market (they’re trading in) will reverse soon.
The actual reason behind this mistake is a psychological bias – known as loss aversion. This is where the pain of loss is felt more than the pleasure of a gain.
The Cost – A small, manageable loss can be turned into a substantial, account-breaking loss. If it’s your first time trading, and you continue to experience losses, the Psychology of Trading is worth learning in detail. Take advantage of stop-loss orders and treat them as non-negotiable, pre-determined exit points.
Overconfidence After Winning Streaks
Success can create a false sense of invincibility, which leads traders to believe they cannot lose money.
The Cost – While trading, overleveraging, taking on too much risk, and overlooking risk management rules result in massive losses.
Unaware of how to avoid this? If so, stay humble, keep position sizes, and treat every single trade as an independent event.
Panic Selling
The moment when the market becomes volatile, fear can cause traders to abandon their long-term strategy and sell off positions during a minor dip.
The Cost – You’ll sell at the worst possible time (the bottom), missing out on subsequent recoveries. If you’re looking to avoid doing so, rely on a solid, prewritten trading plan rather than reacting to short-term market noise.
Overtrading
Due to impatience or the need for consistent action, traders (whether novices or seasoned) often enter too many possibilities, including low-quality ones.
The Cost – Overtrading leads to high transaction costs and increased exposure to losing trades. To prevent achieving such outcomes, traders should set a maximum number of trades allowed per day or per week.
Taking Profits Too Early
As a trader, if you fear losing profits too early, you may prematurely close winning trades.
The Cost – Committing this mistake results in missing out on maximum potential gains and using a poor risk-to-reward ratio. To avoid this, browse a platform, like MavenTrading, whose professionals will advise defining the profit target well in advance. If you do so, trust the system to hit them.
Conclusion
Emotional discipline is one of the most valuable skills a trader can develop. By understanding the psychology of trading and recognizing how emotions influence decisions, you can avoid costly mistakes that derail your progress. Whether it’s resisting FOMO, stepping back after a loss, or trusting your strategy during volatility, each step toward emotional control strengthens your long‑term success. Trading will always involve uncertainty, but with awareness, structure, and discipline, you can navigate the markets with confidence and protect your hard‑earned capital.