Mistake #1. Ignoring Risk Management
If you jump into trading without thought-through risk management, you are doomed to fail. I can call two main mistakes here: too large trading volumes and risking money you can’t afford to lose. It usually happens for the following reasons:
- Greed. You want to earn a lot immediately, which makes you put everything at stake.
- Poor education. You come to trading unprepared and don’t realize the importance of proper risk management.
What to Do. Start Planning
The first thing you need to do is to understand that you can’t risk money you can’t afford to lose. The next thing is to accept the fact that losses are unavoidable. It might sound strange, but the easier you take your losses, the higher your chances to receive good profits.
Invest only the money which you can call “extra”. And even then don’t put on risk the whole sum at once, only a small percentage of it. This way you have more chances to stay in the market for a while.
Mistake #2. Not Reading Your Charts Properly
When you don’t know how to read the chart you can’t predict the further development of the market situation. Many traders lose money because they can’t tell the difference between the main trend and a pullback or false breakout of a level. The same thing happens when they try to make assumptions based on charts with short timeframes.
What to Do. Learning. And More Learning Again.
You have to know how to recognize key levels on charts:
- Support and resistance levels
- Important figures on charts
The best place for learning is a demo account. Transfer to real trading only when you easily mark required levels and determine main trends.
Mistake #3. Ignoring of Daily Chart
It might seem so tempting to open little tiny trades and make quick profits in no time. But in the long run, such a strategy will not make you a successful trader, because you can’t really assess a situation in the market without looking at a daily chart.
What to Do. Learn on Daily Charts
Even if you use short timeframes in your trading, start your session with a look at a daily chart and estimate the situation. This way you will be able to determine the main trend more accurately and make thoughtful financial decisions.
Mistake #4. No Trading Routine
Trading routine is a product of strong discipline. Without discipline and consistency, you won’t gain stable profits. Novice traders often enter trades prematurely. They don’t have a good trading plan which makes them lose money in a couple of days or even trades.
What to Do. Discipline and Consistency
Develop a good plan. Not only a trading plan but a plan for a day as well. Get some rituals. Prepare an action plan for every possible situation and follow it no matter what. Discipline and consistency are a direct path to success.
Mistake #5. Bad Training
Probably one of the main reasons for failure for novice traders is the wrong training. Today it has become so difficult to extract the right data from a huge flow of information on the Internet. Too many traders call themselves experts and publish strategies which turn out to be a failure.
What to Do. Learn from Professionals
Before you apply any strategy or follow some advice, make sure that it comes from an experienced trader. Or even better - find a professional trader who will teach you Forex. This way you will receive and apply only trusted knowledge and will be able to count on consistent profits in the future.
All traders have come through the mistakes we have discussed in this article. Only a couple of years ago you probably would have had to go through all this yourself. But thanks to the development of the Internet, you can learn from the mistakes of other traders. Make sure to apply the tips from this article to your trading. And good luck!