5 Forex Trading Mistakes That Make Newbies Quit!
1. Revenge Trading
Revenge trading isn’t always a conscious thing because many people are aware that this is a terrible habit to have. Revenge trading can be something you don’t even mean to do. A lot of traders have found themselves in trades that they can’t justify and these usually come after a loss or a string losses.
It’s like your mind just puts a blindfold on for a while and tries to undo the loss. While that mindset is great for fixing past mistakes or getting payback on your enemies, it does not work here, EVER!
The market is not your enemy, an enemy will rarely give you money. The market is your friend, a friend that wants to see you achieve your goals and succeed in life. So, whenever you take a loss remember this: Every moment in the market is UNIQUE and INDEPENDENT from one another (find out more).
What does that mean? Do not carry your feelings of loss onto the next trade. Do not allow fear to make you enter prematurely or enter a larger position. Don’t allow fear to take you off of your game plan because as soon as that happens irrational behavior and bad psychology will surely follow you. It’s a slippery slope.
2. Playing not to lose
A lot of new traders think they can outsmart the market and that doesn’t happen they contract and become so conservative that they take fewer and fewer trades, not because there is a lack of opportunities but because they are paralyzed by the fear of losing a trade.
Boys… Girls… Hear me, losing is a part of the game. People with 90% win strategies still LOSE 10% of the time and NOBODY owns a 100% winning strategy.
The point is not to win a lot. The point is to make money. It’s a lot easier to make money then to be right most of the time and a lot of people have a hard time wrapping their heads around that let alone executing that.
In trading being able to stay in the moment will be your greatest asset. Being able to trade the next trade without bias or letting fear stop you. Being in the moment will make it so much easier to follow your trading plan to the tee. Learning how to lose better (meaning lose less often) will serve you better than playing not to lose ever will.
3. Inconsistent trading
If you trade Pullbacks one day, convergences the next, and harmonics the next then there is no hope of being consistently profitable. Newbies are encouraged to try everything but eventually have to pick one or two to work at.
Inconsistent trading leads to inconsistent results. New Forex traders and traders in general are not immune to the search for the holy grail, a strategy that never loses a system that will finally make them money.
Your RISK MANAGEMENT will make you money and nobody can borrow you risk management because your approach to risk includes a way of thinking, psychology, that you still have to adopt.
The cycle, which is probably familiar to most of you, can kill many trading careers. You find a strategy that seems to be working for you and then for no apparent reason it seems to stop working or slows down and you think it’s broken! It’s not.
All that has happened is that the odds of the system have played out and have produced a drawdown that exposes poor risk management. Instead of working on their risk management and psychology they abandon the system and look for another one expecting a miracle of a system that will save them from poor money management.
4. Betting too big
There are articles, Youtube videos, and books that are based on the importance of position sizing and my article on game theory will explain the basic premise of why when playing a game of chance, your bet size can be the sole defining reason for profitability and loss.
Betting big and betting too big are two different things. Betting Big is subjective, What you are comfortable risking can be the cause of sleepless nights to a more conservative trader.
Personality plays a big part in risk-taking and can be influenced by confidence, obviously after proven results, but for the most part, it is a trial by error to judge what amount of risk makes you uncomfortable.
Betting too big, however, is when you have bet so big that you increase your risk of ruin to a level that almost guarantees that you go broke and THAT folks is my definition of gambling. A game of chance that you can not win long-term, but can win.
That’s not what we are doing here we are playing a game of chance and working our edge, because you need an edge to be profitable, but working your edge won’t matter if you risk so much that it only takes 4 or 5 trades to wipe out your account. Don’t bet the farm on anything.
5. Taking wins to the head, Taking losses to the heart
Winning feels good. We can’t lie. It feels good. You were right. When starting your journey, this feeling can be exaggerated. Winning can make you feel invincible like you’ve got this whole market licked and you’re the new king midas you know? No one can touch you.
We have to be careful not to let that feeling affect how we trade because it can be dangerous. You start finding yourself taking bigger positions, riskier trades because now you’ve got some profit to fall back on. DO NOT. Manage your emotions and stick to your plan.
The other side of this coin is loss and probably the hardest part of trading that traders have to deal with but once you accept that you WILL lose, it’s guaranteed. But that doesn’t mean you won’t make money or you’re stupid.
People literally take a trade and if they get it wrong two or three times in a row they think they’ve messed up and must be doing something wrong and, their confidence is taking a massive hit while this is happening.
What they’re not understanding is the market does not dictate who you are. Losing doesn’t make you a bad person. It just happens in trading. Take that and learn how to lose less money and you will be better off.
Don’t bet the farm.
Don’t lose your shirt.
Cut the L.
Keep the W.