You Must Avoid These Trading Forex Mistakes
You’re GOING to make mistakes as you learn to trade, but the traders who actually start making money are the ones who LEARN from those mistakes and figure out how to stop committing them over and over. In this lesson, I am going to discuss the most common mistakes that traders make and give you some simple solutions to them. After that, it’s up to you to learn from them and make sure to avoid them as you continue to analyze and trade the markets.
Getting Sucked Into The ‘Black Hole’ of News Distractions
News disruption “black holes” are a real thing in the world of Forex Trading, and if you're not careful, you'll fall into them and never get out until all your money is gone.
What happens is that traders end up “looking for reasons” why their trade should work out, and as we all know, you can find just about anything you want on the internet and you can find many opinions both for or against any argument or position you want to take, trading included. Another thing that happens is that traders go on the internet and start “researching” economic and trading news and start thinking they have “figured out” what will happen next based on XY or Z economic news release. Then, they place a trade based on that opinion, this is very dangerous. It’s dangerous because very often the trading news or economic news is ALREADY PRICED INTO THE MARKET, in other words, it’s already reflected in the price action and the “big boys” have already acted upon what they believe will happen, before the economic news comes out.
Then, when the news is finally released, a whipsaw will occur in the market, where price quickly spikes one way but then whipsaws back the other direction. This is obviously near impossible to trade and causes most uneducated traders to lose their money. This is the main reason why you should not trade solely on news.
Trading raw price action removes the confusion of trying to trade the news. As mentioned above, news and everything that affects a market is already reflected via the footprint on the chart; the price action. So, once you learn to read and trade the price action you are also learning to read and trade the news without having to actually analyze or read any of the news itself.
Not Understanding That Every Trade Has a Random Expectation
One huge thinking error that most traders have about trading is that they simply do not understand that every single trade they take has about an equal chance of ending up a loss or a win. Now, that is not to say you cannot have a high-percentage winning strategy, because you can. BUT, the thing about trading is that for any given series of trades there is going to be a random outcome of wins and losses, so that means you never know the sequence of wins and losses in a sample size of trades. However, if you expect that your strategy will win 60% of the time, then you can expect that percentage to manifest over a large enough sample size.
It's the same when you toss a coin; You know that you will get heads 50% of the site www.netgenskeptic.com and tails 50% of the time, but within that 50% expectation, you can say 10 straight heads in a row, which can be confusing if you don't understand that you need to flip a coin many times to get 50% heads.
Same thing with trading! You could get 10 losses in a row within say a 100 sample size of trades, but after those 100 trades you could still win 60% of the time. The implications of this are massive. If you don’t stay true to your trading plan and remain disciplined EVEN DURING THAT LOSING STREAK, you’re GOING TO freak out and probably over-trade and get so far off course that you end up blowing out your account!
Remember: ANY ONE trade means essentially nothing! It is the end result of a large series of trades that will show you whether or not your edge and your ability to trade is actually profitable. This also means you need to manage your risk to a level that allows you to get through a large enough sample size to see your edge play out!
Feeling a Sense of Desperation or Urgency to Trade
A huge thinking error that many traders commit is feeling a sense of “urgency” or “desperation” around their trading and to be in trades. This comes from putting all your “eggs” into one basket essentially, the trading basket. This is a huge mistake because trading is inherently risky and inherently difficult due to the fact that it requires such mental strength that many people simply don’t have or aren’t willing to develop.
Hence, you absolutely must realize and accept that trading cannot start off as your Plan A, so to speak. And, even if you get really good at trading and start making consistent profits month after month, you should absolutely still maintaning a side job or side hustle and make sure you do not put “all” your money at risk in the markets. You could even have a long-term investing / stock market strategy or put your money into something like a Roth IRA into Vanguard funds or something similar. Whatever you do, just do not put all your eggs into the trading basket because once you do that you are putting too much pressure on yourself for your trading to become profitable.
If there is one way to surely fail at trading, it’s putting too much pressure on yourself to make money at it. Trading success comes when you are calm, collected and literally do not care if your trades win or lose. That may sound silly, but I’m telling you that once you commit too much emotional and mental energy to any one trade or to your “trading” in general, you have already written signed your “death certificate” in the market.
Waffling Too Much, Not Trusting Your Decisions and Sticking to Them
wafflingWhen you enter a trade, you need to stick with it unless there is a monumental shift in the price action on the SAME time frame you entered the trade on. Please, re-read that last sentence at least 10 times, let it really sink in, because it’s uber-important to your trading career. You see, very, very often, traders spend time analyzing the market, finding a trade signal, setting it up, placing it, then they go back an hour later and start freaking out because the price moved against them a little bit and they are seeing that “negative” sign next to their open trade profit. I hate to tell you this if you don't already know, but it's NORMAL. You WILL HAVE negative trades and you will incur losses, but if you panic every time a trade goes against you, Grahakcunningham.com will quickly blow up your account.
This point goes back to the one above where I discussed the random outcome of any given trade. You simply cannot afford to give too much weight to any one trade because it’s stupid to do so when it’s the large series of trade outcomes that matters, not any singular trade! Hence, you must not waffle on every trade you take, you must let them play out and let the market do the ‘thinking’ so that you can trade stress-free and profitably! In other words, GET OUT OF YOUR OWN WAY and let the process take over!