Everyone knows that statistically only 10-20% of Forex traders actually get profit. Of course, it might force you to give up on your dream to make money on the currency market. But I have a better idea for you - what makes this 10-20% so special. We will take a look at the most common mistakes made but unfortunate traders and will learn how to avoid them.
The list of such mistakes is quite long. In this article, we’ll take a look at 5 reasons why you are still not rich. Other 5 reasons we’ll discuss next time.
Mistake #1: Skipping Demo Trading
Trading on demo account seems irrelevant. But trust me, it’s an important step on your way to success. On the demo account, you will learn how to use a trading platform without risking your money. Even though MetaTrader 4 is simple, you still need to learn how to use it.
Plus, on the demo account you gain your first trading experience. Here you will learn to use your trading strategy and will get ready for every situation that might occur in the real market.
What to Do: Start with Demo Trading
Open a demo account and start trading. Try to imagine you are trading real funds. This way you will be prepared for the transition to live trading technically and emotionally.
But don’t linger. 1-3 months is the perfect period for testing of any trading strategy.
Mistake #2: Trading Too Often
Too many traders open trades even if it doesn’t correspond to their strategy. They want to make money so badly that make rash decisions. And this leads them to fail.
Often it is caused by false analysis of the current market situation. Looking at a chart with a small timeframe you can mistakenly think that the market moves in your favor.
What to Do: Slow Down
Always stick to your plan. Even if you think that the market moves in your favor and you should open a trade right away, stop yourself and think again.
If you notice that you open too many positions, try trading on a daily chart. This way you will see the main trend and avoid reckless decisions.
Another useful thing to do is to trade from your desktop only. Constant access to accounts from your phone might have bad consequences.
Mistake #3: Bad Dealing with Losses
Many traders leave Forex right after their first losing streak. They don’t know that losses are an integral part of trading. Even the most successful traders have losing trades. The only thing you should care about is the end result that should be positive.
When traders can’t deal with losses that make wrong trading decisions caused by emotions. Sometimes that lose their confidence and open trades with a smaller volume than they should. But even more often they jump into the market in rage and completely lose their money.
What to Do: Accept Losses and Learn How to Work with Them
Accept the inevitability of losses and wrap them to your advantage. After your next unfortunate trade go back and analyze it in order to learn from your mistakes. Build strong risk management and always stick to your strategy. This way it will be more difficult to take you by surprise.
And most importantly, stay cool. If the loss bothers you too much and you start losing control, take a break and return to trading only when you are ready to get back to your plan.
Mistake #4: Overloading Your Charts
People tend to complicate things and take this feature to trading. Novice traders think that the more indicators they have on their charts, the better they will follow the price.
But the problem is that behind all those indicators they can’t even see the price. All these colorful signs make your eyes run up and it becomes impossible to keep track of important market movements.
What to Do: Simplify
In order to truly understand trading, learn to work on an empty chart. Just remember that piling up all those indicators you overload your brain and complicate the trading process.
Mistake #5: Lock on Money
Often traders focus on the profits they make. They are so obsessed with money that they lose their ability to think properly even though they need a clear mind for successful trading.
What to Do: Think of Digits
Forget about the results and focus on the process. Don’t think of how much you’ve earned or lost. Think of how to make the right decisions and follow your plan. Imagine that the numbers you see on your screen are just digits. This way it will be easier to focus on the process and achieve success.
Let’s Summarise
In short, to eliminate all these mistakes you need to perceive trading as a mechanical process, not a creative one. There is no place for spontaneous decisions and stupid actions. Start with the basics, learn how to trade, create a plan, learn to stick to it, get good risk management and then you will have a chance of success.