6 Typical Mistakes of Novice Forex Traders

Updated on

In recent years, there are more and more willing to try their hand at investing in various financial markets, including the FOREX currency market. But, nevertheless, despite the emergence of new teaching methods, and the professional level of teachers themselves, I can not help but notice that the most common mistakes beginners in traders move from year to year. In this article, I want to analyze in detail what is stopping the newly emerged investor traders from finally becoming successful. Well, give some advice based on life experience.

 

MISTAKE 1: LACK OF KNOWLEDGE

 

So, let’s start from the very beginning. The first and most important mistake: the lack of the necessary knowledge base – a person commences trading after surface training or without it at all. It is almost impossible to get the skills of trading in books. As a well-known psychologist, trader and author of many bestsellers for beginners, Dr. Alexander Elder, studies for a pilot or surgeon for several years, then makes trial flights or operations under the guidance of an experienced mentor and only then, very cautiously proceed to work independently. Nobody believes that you can control an airplane or do operations by reading detailed instructions. Why then, to work on the stock market, the overwhelming majority of beginners treat differently?

 

It is best to first thoroughly study all the nuances of working on forex directly with a practitioner, then follow the trial period in a demonstration or a small real account under the guidance of an experienced mentor, and only then should carefully work with observing all recommendations on a real account. It is also important to understand that to a demo account, if you chose it, you must treat it as if it were already real.

 

MISTAKE 2: SELF-CONFIDENCE

 

The second mistake of a novice trader: excessive haste and self-confidence. According to statistics, dealing prices in the first two months earn 80%, but in the third or fourth month, virtually all lose their initial capital. Why does this happen?

 

Here is an example of driving instruction. After receiving the rights, at first the former pupil, and now the full-fledged driver tries to drive very carefully, observing all the rules of the road, but in two or three months you will not recognize him. Signs to him are already uninteresting, it seems to him that he has mastered the methods of driving a vehicle and knows them “like his own five fingers”, here he is in for trouble. According to statistics, most accidents occur during the first 4-5 months, with the peak occurring at the end of this period. The same applies to work on the stock exchange. The rules of safe trade must be followed in a year and two, they do not change.

 

ERROR 3: DAY TRADE

 

The third mistake: an attempt to start trading with day trading, that is, from work inside the day on short-term schedules, mistakenly thinking that it is possible to earn so much. In fact, this is certainly a myth.

 

Daydreaming is successfully handled only by professionals with many years of experience and is able to make decisions instantly, not so much on the basis of the market analysis, but on the basis of their own intuition and rich life experience. If these components are absent, success is almost impossible to achieve.

 

For beginners, I recommend starting work on the basis of technical and fundamental analysis end of the day, that is, with medium-term positional trading on daily charts.

 

MISTAKE 4: WORK AGAINST THE TREND

 

The fourth and most common mistake is the work against the trend. 50% of beginners lose the initial deposit for this reason.

 

There is a good rule: it’s never too expensive to buy, and too cheap to sell.

 

Do not consider yourself the cleverest, you must merge with the crowd. No wonder there is an English saying “trend is your friend.” Trend your friend – while he is there is a need to go with the flow.

 

MISTAKE 5: THE PASSION OF THE GURU OF THE MARKETS

 

The fifth mistake is excessive confidence in various kinds of indicators, mechanical trading systems, analysts, including the guru of financial markets.

 

Remember, you and only you make the decision. This is your money, and if you lose them on the basis of the recommendations of the aforementioned assistants, none of them will take responsibility for your losses. Besides making transactions on the basis of your own analysis, you are gaining an invaluable experience, which is surely useful to you in the future.

 

MISTAKE 6: TRADING WITHOUT A PLAN

 

And finally, the last, sixth mistake of a novice trader is the lack of a clear trading plan and own strategy. You at any time, no matter how the market behaves, should know what to do at the moment. For this, especially beginners, it is necessary to keep a diary of the trader, where should be described:

 

    • Date and time of compilation;

 

    • The name of the instrument on which the trading plan is drawn up;

 

    • The reason for choosing a tool;

 

    • The entry point to the market (buy, sell) with a comment, on which basis it was chosen;

 

    • The point of loss limitation is StopLoss ;

 

    • The point of exit from the market with the maximum profit is Take Profit;

 

    • Commentary after fixing profit or loss.

 

 

It is very important to choose a position for entering the market to keep the profit / loss ratio at least 2 to 1, and in general, the more than the better. Then the mathematical expectation of profit ratio will be positive.

 

Observance of all the above rules and avoiding mistakes will allow novice traders not only not to lose their first deposits, but also to start earning immediately on any financial markets, including Forex.

 

Related posts