So when people are just starting out with forex trading like me, what are some of the biggest mistakes they tend to make? Like, what are some things they should really try to avoid doing if they want to be successful?
avoid going live until you have spent time learning from the courses on this site. Rome wasn’t built in a day. You have a long haul ahead if you want to become consistently successful.
You have to avoid over-trading, taking big lot size in trading and revenge trading. Don’t grow excited even if you suffer a loss.
All answers above are true and you should avoid these mistakes. My 3 pesos, avoid “magic systems” which give you gazilions percent of return without knowledge, “seller dreams” with guarantee your success and all these marketing materials on the internet which show you that trading is easy-peasy.
Don’t take emotionally-influenced decision and avoid over trading because these two mistakes will consume your equity.
Plan your trade and trade your plan, this means that traders should have a clear trading plan in place before entering a trade, and should stick to that plan regardless of market conditions or emotions. By having a well-defined trading plan, traders can make objective decisions and avoid impulsive or emotional trades.
As far as I know, the most frequent mistake people make is that they start trading with real money before educating themselves.
Yeah, revenge trading is one of the worst thing a newbie trader can do.
Anticipating the reversal so you can score a “big win.” In other words, you’re going against the trend. The gurus will tell you to do that. Don’t!
Instead, I have learned to place limit orders low to go high and limit orders high to go low. I must say, my results aren’t too bad. I’ll write a post soon to show you what I mean.
FOREX is hard simply because it is stuck in a spasmodic trading range where the price whipsaw’s around without much direction. Therefore, if you’re going to trade regularly, you will have to get comfortable trading within ranges and using wide stops. No way around it.
I agree, as I just iterated in another reply. If you just look for this pin bar or engulfing candle at this level, it will automatically reverse and you’ll score yourself a big win. If only that were true!
There is only one thing you should ultimately avoid: Distraction.
If you have a solid understanding of how to extract profits from the market and you have come up with what you think is an edge in the market, you’re halfway there.
Test your edge, preferably through forward-testing in a demo as opposed to backtesting which can be fraught with all sorts of flaws and biases.
If your edge stays sharp in forward-testing, elucidate it in a well-written trading plan.
Now start planning your trades and trading your plan.
Do not deviate from your plan unless you reach your predefined maximum drawdown.
Everybody’s got an opinion (including me) but it’s effectively all just noise.
Ignore us all.
Just stick to your plan!
Avoid not planning your trades and just entering and exiting trades when you feel like it. It’s the fastest way to blowing your account!
I believe trying to avoid making mistakes will set you up for failure. Do the complete Baby Pips course, work out your trading plan, back test it by looking at 10-15 years worth of data, trade it in demo EXACTLY how you will when live trading for AT LEAST 6 months, make any adjustments required, demo trade some more, replicate what you did in demo by sticking to your trading plan. If you were successful in demo, you will be successful when live trading. Sounds simple, right?! It actually is relatively simple, it’s just that people don’t want to do the hard yards in the learning phase. They want to rush straight into making money and then wonder why they fail. Another tip, never focus on the $ you are making. Focus on your % return. Keep this return consistent and the $ will increase as your balance does and take care of itself. One last thing - you will make mistakes - and that is ok! That’s how we learn as humans - as long as you learn from it and don’t keep doing the same thing and expecting a different result Good luck!
I can’t agree with you in this part, when emotions start to play a role ( when you get big losses or achieve really good profit ), traders could start to change their trading plan.
Curious why should you change your trading plan if you have big profits or losses? You should have seen these results when back testing and demo testing, so it should be nothing new
I stand by what I said: after back testing your strategy with 10-15 years of data (or longer if possible), and successfully demo trading for a minimum of 6 months (12 months would be ideal), you will be successful. This process should have seen your plan through all sorts of markets. If it stands up, then it will in live trading.
I do agree with you that emotions can play a part when switching from demo to live, but if you stick to your proven plan, you will replicate your demo results and be successful. I think one of the big reasons many traders, at least initially, lose or blow their account is because they do change their successful trading plan (or don’t follow it) because they let their emotions dictate their trades instead of following the plan.
If strategies do what you saw in back test, it is good sign to be profitable in the future, but fear and greed are strong emotions, not everyone will handle with it.
That’s very true!
A trader should avoid over trading and emotional trading because these two malpractices destroy a trader completely.