6 TYPICAL MISTAKES OF BEGINNER FOREX TRADERS THROUGH THE EYES OF A PROFESSIONAL
Errors of beginner forex traders. Why beginners in the Forex currency market lose deposits. We discuss the mistakes of traders.
In recent years, there are more and more people who want to try their hand as an investor in various financial markets, including the FOREX currency market. Nevertheless, despite the emergence of new teaching methods, and the improvement of the professional level of the teachers themselves, I cannot help but notice that the most common mistakes among beginning traders pass from year to year. In this article, I want to analyze in detail what is stopping the new traders and investors 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 crucial mistake: the lack of the necessary knowledge base – a person, begins trading after superficial training or without it at all. It’s almost impossible to get book trading skills. As a well-known psychologist, trader, and author of many bestsellers for beginner stockbrokers, Dr. Alexander Elder, well, they study as a pilot or surgeon for several years, then perform test flights or operations under the guidance of an experienced mentor and only then, very carefully proceed to work independently. No one believes that you can fly a plane or do operations by reading the detailed instructions. Why then, do the vast majority of beginners view work on the exchange differently?
It is best first to study more deeply all the nuances of working on Forex directly with a person practicing. A period of trial trading on a demo or small real account follows under the guidance of an experienced mentor, and only then careful work follows all the recommendations on a real account. It is also essential to understand that if you choose a demo account, you must treat it as if it is already real.
MISTAKE 2: SELF-CONFIDENCE
The second mistake of a novice trader: excessive haste and self-confidence. According to the statistics of dealing centers, in the first two months, they earn 80%, but in the third or fourth month, almost everyone loses their initial capital. Why is this happening?
Here is an example of driving instruction. After obtaining the rights, at first, the former student, and now a full-fledged driver, try to drive very carefully, observing all the rules of the road, but after two or three months, you will not recognize him. Signs are no longer of interest to him; it seems to him that he has mastered the methods of driving a vehicle and knows them “like the back of his hand,” and this is where trouble awaits him. According to statistics, most accidents occur during the first 4-5 months, with a peak at the end of this period. The same applies to work on the exchange. The rules of safe trading must be observed after one year and two; they do not change.
MISTAKE 3: INTRADAY TRADING
The third mistake: an attempt to start trading with day trading, that is, from intraday work on short-term schedules, mistakenly thinking that you can earn a lot. This is, of course, a myth.
Only professionals with many years of experience and ability to make decisions are instantly engaged in day trading, moreover, not so much based on market analysis, but based on their intuition and rich life experience. If these components are absent, it is almost impossible to achieve success.
For beginners, I recommend starting work based on technical and fundamental analysis of the end of the day, that is, with medium-term positional trading on daily charts.
MISTAKE 4: WORKING AGAINST THE TREND
The fourth and most common mistake is working against the trend. 50% of beginners lose their initial deposit for this reason.
There is a good rule: it is never too expensive to buy, and too cheap to sell.
Do not consider yourself the smartest; you need to merge with the crowd. No wonder there is an English saying trend is your friend. The trend is your friend – while you have it, you have to go with the flow.
MISTAKE 5: MARKET GURU’S ENTHUSIASM
The fifth mistake is excessive trust in various indicators, mechanical trading systems, analysts, including the gurus of financial markets.
Remember, you and only you make the decision. This is your money, and if you lose it based on the recommendations of the above assistants, none of them will take responsibility for your losses. Also, making transactions based on your analysis, you will gain invaluable experience, which will be 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 developed trading plan and own strategy. You, at any moment in time, no matter how the market behaves, should know what to do at the current moment. For this, especially for beginners, it is necessary to keep a diary of a trader, where the following should be described:
- Date and time of compilation;
- Name of the instrument for which a trading plan is drawn up;
- Reason for choosing a tool;
- Market entry point (buy, sell) with a comment on which basis it was decided;
- Loss limit point – StopLoss ;
- The exit point from the market with maximum profit – Take Profit;
- Commentary after fixing profit or loss.
When choosing a position to enter the market, it is essential to observe a profit/loss ratio of at least 2 to 1, and in general, the more, the better. Then the mathematical rate of expectation of profit from you will be positive.
Compliance with all of the above rules and avoiding errors will allow novice traders not only not to lose their first deposits, but also to start earning money right away in any financial markets, including Forex.
Good luck with the trade.