1.
10 Biggest Mistakes New Traders Make (And How To Avoid Them)
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2.
10 Biggest Mistakes New Traders Make (And How To Avoid Them)
Why Do 95% Of Traders Fail? What Are The Biggest Mistakes Forex
Traders Make?
OK, so this is a well-known fact. So what can you do to avoid joining the masses? By
reading the mistakes below you can learn from traders who have tried, failed and burnt a
whole in their pockets…and then some!
You can learn from other's experiences - this process is less painful for you and much less
costly too!
But maybe you have prepared yourself well. Read lots of books, surfed the net for videos
and tutorials, logged on to a few webinars, attended some seminars, chatted to those more
experienced, bought expensive software hoping that will give you an edge, researched a
good Forex broker and opened a demo account waiting to transfer funds to a live
account...to become an active Forex trader.
Congratulations, you've done it, you've made it. All that work – surely now you're a proper
Forex trader.
So why do so many people get to this stage and STILL lose all their money?
Well learning and practicing with paper trading and a demo account still leaves you with
much to learn when it comes to risking your hard-earned capital. You see the emotions
associated with money are strong – especially if we have had a long journey already to
building a good trading fund and going through the considerable learning process mentioned
above.
By now you have probably spent much time learning – now you want to see the
profits…right? You want to make money from all this time invested in learning – am I right? I
don't blame you because that's exactly how I felt and many others are in the same situation
too.
But, all the learning you have done is great, but its only half the process to becoming
consistently successful as a Forex trader. The other half is YOU. How you interpret what you
have learnt and more importantly how YOU use the information.
If you are really serious about making it as a Forex trader for the long-term then you
need to understand and control the way YOU think AND behave when trading.
So are you ready to get started? OK here are the 10 most commonly made mistakes:
#1 Mistake - Trading With Your Emotions And Not Keeping
Detached From Your Trades.
We have already touched on this above but what does this mean? Well, you may be
surprised by the fact that many find this the hardest part of Forex trading and fundamentally
is the reason why most people fail.
The way to avoid making this very common mistake is to formulate a trading plan, back test
it using your charting package going back over the last year, analyzing how successful your
strategy would have been. Once you have this write down a trading plan.
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3.
10 Biggest Mistakes New Traders Make (And How To Avoid Them)
Develop confidence in your strategy and ability to enter and exit winning trades and then
open a live account. Trade with the minimum amount your broker will allow and then the
most critical part. TRADE YOUR PLAN.
After planning your trades, you must then trade your plan. You must learn how to become
automated in your approach and emotionally detached from all your trades.
You must ALWAYS stick to your plan. No excuses. No ifs or buts. PERIOD.
How else will you know what works and what doesn't if you keep changing your mind and let
greed, fear and expectations get in the way?
Take a look at this video interview with Stuart McPhee of The World Money Show
To summarize – keep your emotions in check and detach yourself from your trades.
#2 Mistake - Not Having Discipline.
This goes hand-in-hand with the above. Being able to trade your plan, enter and exit trades
with the same information, time after time, will make you a good, consistent trader. This
again is where most people fail.
Why do you think Forex Robots and automated software are so popular today?
People lose money when they are unfocussed and don't have the level of discipline needed
to be consistent in their trading decisions.
To summarize – be regimented and automated with your trading and above all stick to your
trading plan.
#3 Mistake - Not Having A Note Book To Keep A Record Of All Your
Trades.
A good way to improve as a trader especially when you are formulating your trading plan is
to keep a record of your trades. This way you can go back at the end of the week and month
to assess your own trading. This tells you what's working and what you can possibly remove
from your strategy.
Note down your entry level and why you entered when you did. Identify your stop loss and
the amount of stake on the trade. Note how the trade is developing and how you feel. Do
you stay in the trade until the maximum level of profit is reached? Did you come out of the
trade early therefore not maximizing the profit potential of the trade? What triggers are you
looking for as an exit strategy?
Note down how many points/pips you gained. This helps grow your confidence as you can
look back to see your progress.
Every trader will trade in a different way so your own development and self-awareness is
very important. You can easily identify your strengths and weaknesses by using this
technique and in a way become self-taught.
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4.
10 Biggest Mistakes New Traders Make (And How To Avoid Them)
To summarize – write all your trades down in your note book. You will be learning mostly on
your own and this will be your only source of reference to learn from.
#4 Mistake - Making Your Trading Strategy Too Complicated.
KISS – Keep It Simple and Straightforward is the key. A common mistake is to make your
Forex trading strategy too complicated. There is nothing wrong with looking to see what
different indicators do and the results they bring but don't choose them all!
Paper trade and use a demo account to learn which indicators and chart settings you like
best and which bring you the best results. Your note book will help you to develop this too.
Why do we keep the trading strategy simple?
Well this is especially true if you trade the smaller time frames. You will need to make trading
decisions quickly. Once you miss an entry point then the trade is lost. The less information
you have to analyse the easier it is to decide to make the trade or leave it.
It is as cut and dried as that. It’s a black and white situation. Either you decide to enter the
trade, or you don't. This also goes back to the previous points of having the discipline to
make that call and have a good, clear trading mindset to act on your decision.
To summarize – you want to make sure you can jump on to a trade as soon as your set up
presents itself. This is much easier to do if you have a couple of things to confirm a trade
entry – rather than many!
#5 Mistake – Not Sticking To Your Trading Plan.
Deviating from your trading plan is never a good idea. The only way you are going to know
what works and what doesn't is to stick by your plan. By the time you are trading with a live
account, you should have a trading plan which has been rehersed many times. Stick with it
and have confidence in your knowledge, understanding and experience.
Because of the nature of the Forex market, trading is based on probability – you will not win
every trade every time. That's a fact.
Have comfort in the knowledge that know-one can be 100% accurate all the time – not even
an automated system or Forex robot. You have to go with what works most of the time and
is why having an active stop loss and good money management skills will minimize the
losses you will have.
This is also why its recommended to move on to trading a live account as soon as you have
consistent success with paper trading and then using a demo account. Once the practice
has been done, you are clear how to use your charting packages and place trades with your
Forex broker, then this is a good time to start trading with your live account.
To summarize – ok, I will put my hand up to this one! Yes I have gone against my trading
plan and lost out. It was during those early days of learning – made sure I learnt from that
mistake!
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5.
10 Biggest Mistakes New Traders Make (And How To Avoid Them)
#6 Mistake – Risking Too Much On One Trade.
Not doing your homework and fully calculating how much of your trading account you can
afford to risk on each trade, is a common mistake people make. The only way you will stay in
the game long enough to combat any weakness to your strategy and mindset is to protect
your hard-earned capital.
The maximum you should be risking is around 3%.
The temptation is to see profit potential and trade with more money, therefore risking more of
your account size. Your trading psychology and trading plan will have a part to play in the
risk you take on each trade.
Greed and stress don't go well with successful trading careers.
Make sure you are not risking more per trade due to the need to keep up with mortgage
repayments or general day-to-day living expenses. Having this weighing on your mind will
not help you make the best decisions for your trading and money management so make
sure you have these costs covered before you embark on your trading career.
To summarize – make sure you do stick to the maximum 3% risk to your account. I would
be a shame if you lost out on the opportunity of trading the Forex market for the long term
just because of one greedy, emotional mistake.
#7 Mistake – Over Trading.
Over-trading is common, again for many reasons including excitement and wanting or
needing to make more money. Knowing when to trade is important but perhaps more
importantly knowing when not to take a trade is more important.
It is better not to trade, or miss a trade, than it is to make the wrong trade.
The market will not care if you need to make more money on one particular day. Trade when
a set up presents itself – only when your trading plan gives you the entry and exit signals. If
you find trading the smaller time frames too stressful, then you can always pull out to a
larger time frame. You will have to reassess your risk strategy as you will need to give your
trades room to move. This shouldn't be a problem – it's just a small adjustment.
To summarize – knowing when NOT to trade is as important as knowing when to trade.
#8 Mistake – Not Having A Dedicated Space To Trade And Having
Constant Interruptions.
Being able to focus on your trading is essential, especially as you start trading with a live
account. Have a dedicated computer, clear desk and a quiet space – a home office if
possible in order to trade without interruptions. The most successful traders see trading as a
business. They are professional, dedicated and focused on the job.
The Forex market is volatile and liquid, which makes it possible to trade and make good
returns by spending only a couple of hours at your screen. So the time needed to remain
focused will be comparatively small compared to your returns.
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6.
10 Biggest Mistakes New Traders Make (And How To Avoid Them)
To summarize – if you can, have a dedicated area to trade. You will need to focus on the
market and your strategy, especially in the early stages.
#9 Mistake – Increasing Your Commitment To Trades With Success.
If you keep your risk level to 3% then you should be trading for a long time. However, many
people don't do this, get excited when they have a big return and a series of successful
trades and risk more than the maximum.
Remember Forex trading surrenders to the law of probability. What do you think will happen
when you trade with more risk? Chances are the next trade will end up being a losing one!
By all means keep to the 3% risk and if this allows you to trade bigger lot sizes or pounds
per point, then great.
Again this is part of the psychology of how you trade. Greed, excitement and spending your
profits before you have made them, or over trading just because you want to treat yourself is
one of the fastest ways to wipe out your account. It happens to many. One bad decision can
close your account for good – just be aware this can happen and you will be fine.
To summarize – this is another one of those 'getting greedy' mistakes. Just stick to the plan
and because this will automatically increase your account size, this will in turn increase your
commitment to each trade.
#10 Mistake – Adding To A Losing Trade Hoping That The Trend
Will Reverse.
'The most successful traders are those who lose the least, not make the most'.
If you are in a situation where your trade is losing you money come out of the trade at your
stop loss level. This is where your trading strategy has located this level. DO NOT STAY IN
THE TRADE or worse DOUBLE UP ON YOUR POSITION.
Hoping the market will act in a certain way, expecting it to pullback or waiting for the trend to
reverse is dangerous. The market doesn't care what you hope for, your situation or your
expectations so be kind to yourself and minimize your losses.
Come out of a bad trade with no exceptions. Many traders make the mistake of doubling up
on a losing trade in the vague hope for a trend reversal and they will make their losses back
immediately.
Traders must realize losing trades will happen. It’s a fact. But it is how you deal with this
which will make the difference between a long and successful trading career and total wipe
out.
I know which category I would want to be in – don't you?
To summarize – I traded with someone who doubled up on his position size just to claw
back his loss as he expected price would reverse trend. He was wrong and consequently
lost a lot of money. I was horrified.
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10 Biggest Mistakes New Traders Make (And How To Avoid Them)
And Finally…
This report has been written by me, Annabel Meade. I am an experienced and successful
Forex trader.
'I educate people to work less and earn more trading the Forex market. How much would
you like to earn, working 15 hours or less per week?'
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Web site – www.tradeforexfromhome.com/
Blog – www.forextradinginfo.org
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Be sure to let me know how you get on and let me know what you think of this report – email
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With best wishes. Good Trading.
Annabel Meade
Professional Forex Trader
Trade Forex From Home
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