Any 100% accurate tool, indicator, or market approach? Any finance or economics school teach profitable trading? NO!
Trading is all about timing and price direction. However, there are tools and methods that can help rookie traders “not lose the money,” which should be their main goal.
Before producing profits, make an aim to not lose money in the first year or two. After that, you can move on to making money. Instead of asking what pros do to generate money, ask what losers do to learn from their mistakes.
Listed below are some of the mistakes; Traders make step-by-step mistakes that close accounts.
1. Size of Your Account
First, your money. I think 90% of traders lose money because they have a tiny trading account and want to make big profits to meet living costs.
Many brokers have promotions for trade accounts under 500EUR. Brokers realize that many retail traders have 500 euros but few have 20k for trading.
Trading requires money. Done!
I think even beginner retail traders need +20.000EUR to trade normal risk sizes, leverage, and drawdowns without problems. Another reason account size matters is EU trading leverage law.
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2. Size of Your Position
“Too huge position size” originates from the first issue above. Because traders have limited balances, they won’t trade micro lots to leap a few cents. I see why tiny account risk is 5-10% per trade, not 2%. This can rapidly turn disastrous.
That sounds OK if you risk 50EUR-100EUR per trade on 1000EUR accounts, right? That’s not a lot of money, but traders fail because of the proportion.
Would you risk 5000–10,000 EUR per trade with 100,000 EUR? I’m confident you’ll say no because you don’t need that much to pay basic living expenses.
3. Skipping Stops and Losing Trades
Assume new trader avoids first two blunders. What might go wrong if he risks only 1% of his account? No suitable exit on a losing trade, I think.
I met folks who were generating nice profits at the start, but then one or two deals they didn’t close when they should ruined their account and made it worse and worse. They were praying for a position change to lessen the terrible loss, but it often goes against you.
Solution to this:
Before trading, calculate risk exit! Admit your mistakes! This is crucial: leave a losing trade and invest in a healthy structure. Why wait if the train is gone? Try a cab or bus station.
4. Revenge Trading
Did you short, get stopped out, and then short again when the market dropped slightly? Did you buy when your initial trade stopped? In most situations, you were stopped out again and lost much more. Revenge Trading—we all do it.
The solution to this is don’t revenge-trade. Simple. If you were stopped out, walk outside, step back, and relax! Bring new ideas and trading plans tomorrow.
How about technical trading errors?
It’s hard to be wise here because there are many trading methods, and only one may succeed. However, these may help:
5. Early Entries
Wait to sell if you find resistance, Do not sell too early. If market reaction is lower, you follow the trend. The market must confirm your bias first!
6. Closing Winning Trades Too Early
Long into 3:1 risk-reward, you want to close. That’s excellent, but why close trade now while market is in strong upward momentum? There’s always space for more prolonged legs that might bring you much more profits.
I also set reward objectives, but I aggressively pull my stops close to market price and leave some options open since the market might always surprise for a larger move. I won’t close winnings early. I just want the market to tell me when to go and let my profits flow.
7. Trade distinct trends across markets.
How do new traders start? They trade EURUSD or GBPUSD. Trading requires multi-instrument focus. Since market conditions vary, you cannot consistently trade EURUSD.
Because FX fluctuates, your portfolio should be diversified. Sometimes stocks move, then commodities. So trade and focus on evident patterns across markets. If the market is unclear after 20 seconds, move on and look for other clear patterns.
Take cryptocurrencies. Last year’s robust rise was ideal for a set-up. Opportunities in 2018? No way. I think these traders should now search for trade ideas in FX, stocks, commodities, etc.
However, many market participants that traded cryptos vigorously last year were new to finance, so they are lost and continuing buying cryptos instead of other assets. Since markets have distinct personalities, it takes time to comprehend each one.
You should also get to know these critical mistakes made by beginners in Forex market
8. Bots and Indicators
Use indications and robots sparingly. RSI, MACD, and others are calculated from market prices, so how can they tell you where we’re going? They can assist validate your market move opinion, though. Some robots function well, but humans must be involved to avoid harmful market signals.
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