Starting your voyage into the forex trading world doesn’t come naturally to most people. In fact there are some pretty big mistakes new forex traders make without knowing that they “don’t know”. So below, I have listed three of some of the most common crucial mistakes new forex traders make.
Over-trading: This crucial mistake is one that for most people is very hard to avoid in the beginning. Because you are learning a new skill or system, you usually want to try it out. And after all, sitting in front of the computer for hours should yield SOMETHING as a result right? Well, unfortunately, that’s not usually how it ends up.
I have found that most people will eventually find setups if they stare at the screen long enough, whether their system gives a setup or not. Taking too many positions becomes unwieldy, and you end up losing focus on analysis, because you are trying to manage too many orders.
Also, another common form of over-trading is gaining some hubris when you have a good start to the week, and end up taking more trades on lower quality signals because you are trading with “won money”. I have in fact, had weeks when I started that I would go up 10% in the first couple of days, and then because I wanted to continue on, by the end of the week, I would be back in the negative again. This all has a very bad psychological effect, as well as usually isn’t profitable. The best traders know the mantra “Profitable Traders Get Paid To Wait”.
- Not Using A Stop: Yes, I know this seems obvious. And yet, I have seen time and time again, people’s account statements where they lost 30-40% on one trade!! When I inquire, they said they put a stop loss, but as the market approached, they moved it to give “a little more space”. Carry that hours or even days later as the market continued against their position and they finally took the hit WAY later than they should have. Remember, you will NOT be right all the time. It’s part of the business. Set your stop loss, and stick to it! That way you can only lose a set (hopefully small percentage) amount, and recover after a loss much easier.
- Not Understanding Risk: Risk is part of the game when forex trading for sure. But not knowing exactly how much you stand to lose on a trade is simply unacceptable because it is completely controllable. Too often, new traders think only in terms of “pips risked” when in fact they should be thinking in terms of “percentage risked”.This way, it doesn’t matter how many pips the stop loss is because you adjust the lot size based on percentage risk, NOT pips. Also, it is important to learn just how much per pip in your funded currency each pair uses, because this can vary from pair to pair. In the end, you should know exactly how much you are risking on each trade and put limits on that risk.
3 Crucial Mistakes New Forex Traders Make
So, this list of crucial mistakes new forex traders make is certainly not exhaustive, but the points made are very important. Take your time, spend more time learning than trading, and you will be on the road to success.
If you would like to learn how to trade like a professional check out our 5* rated forex mentor program by clicking on the “Get Started” Button below