Forex traders are right more than 50% of the time, but lose more money on losing trades than they earn on earning trades. Forex traders should use stops and limits to enforce a risk/reward ratio of 1:1 or higher.
GREEED IS THE BIGGEST MISTAKE.
R/R Ratio Should be 1:2
I guess lack of knowledge and maybe the assumption that its easy!
Trading too late in a trend and I don’t mean evenings or during the night…
No money management
I wouldn’t be able to put a pin in “the number one mistake”…it’s more like a combination of:
Not understanding risk management principles
Trying to trade with insufficient capital
Setting unrealistic goals
Worrying about others opinions about where an instrument is heading (i.e. looking to external sources for bias confirmation)
Focusing on the results, not the process
Not journalling
Not developing a trading plan, and sticking to it
Ignoring the importance of psychological factors
Focusing solely on one method, and not factoring in intermarket relationships
Thinking there are shortcuts in the learning process
Not being dedicated enough, and completely giving themselves to the educational process (i.e. over-confidence)
Over-leveraging themselves
Not meditating, exercising, or practicing a martial-art to develop discipline
Approaching the markets without ritual
To name a few 
(Disclaimer: I’m not perfect. None of us are. We all fall victim to one of the above “mistakes” at one point or another.)
A lot of things being a newbie myself I tend to make or used to make these mistakes and I’m still working on these things
- Trading too late in a trend or getting on a trend too late with little reward and big risk ratio
- No money management
- Being over cautious
- With that placing one or two trades a week
- Focusing on one pair
- Trying to include fundamentals /that’s just not possible at least to me/ pick one or the other technical or fundamental/
- Not being flexible
- Get mind boggled with too many too good to be true systems and getting confused with all these starting to second doubt your system
For now that is all. So in conclusion it’s always good to trade several pairs not just one given the low volatility of forex. And implement proper risk and money management risk 1:1 at least. As for position sizing never risk more than 1% per trade well it could be lower than that if 1% is a little too high for the size of your account.
Actually, we see that when man start forex, at first they earn enough money. But At a time, they lost all their money. For this, I tell greed is one of problem for this reason. If people maintain all rules of forex trading, They will not see this moment.
In my point of view and away from trading itself, full dependence on a third party tool or software for trading on MT4 believing that it would make you a millionaire is a BIG mistake that most inexperienced newbie traders fall in!
Just wanted to mention that not all 3rd party trading solutions are a big mistake, take Bloomberg trading solutions for one e.g. Bloomberg Asset and Investment Manager (AIM) and other FX broker tools.
The number 1 mistake that most inexperienced traders make is that “they will not listen to good free advice” so they continue going down the same wrong path trading at the wrong time with the wrong attitude until they fail and give up.
MT4 is just one of those excellent software trading tools that can be good or bad depending on the person using it and their level of trading knowledge.
It is not Forex software that makes traders into millionaires, it is the traders themselves who by doing their homework with the software who become millionaires over a long period of time.
I highly doubt most traders are right 50% of the time. The biggest mistake that traders make is trying to learn from the wrong places. Most aspiring traders me included when I first started out. Try to read and absorb and learn all the information there is out there. The problem is the majority information out there is crap. Sorry I don’t mean to step on anyone’s feelings. A prime example would be the book by Edwards and McGee on technical analysis it was written years ago and since then the book has been rehashed and rehashed and rehashed 1000 times by people that are good book writers but don’t know anything about trading. Then throw in the mix of so-called gurus trying to sell even more crap over the Internet. This makes it very difficult for and aspiring trader to figure out what works and what doesn’t work. The next big mistake is believing that there’s some sort of indicator or combination of indicators that is going to give them a heads up in the market. I’m sorry for I’m going to step on people’s feelings again but it’s my honest opinion. If you cannot look at a chart and tell if it is up trending, down trending, or consolidating you have no business opening a live account at this point. You have more learning to do. Some fancy squiggly line on the chart is not going to help you to see what you’re already blind to. There is however an alternative that does work and that is becoming very familiar with the market in which you intend to trade. Learn how to read a naked chart. Is the chart making higher highs and higher lows? Is it nearing an area of resistance where it could not pass before? Why is it hitting a resistance? Are there sell orders there if there are you should be able to see them getting it and recognize it when it happens? Once you can answer these types of questions then you are ready to begin your trading career? It is possible if you take the time to learn and understand your chart without all those squiggly lines blocking your view of the price. More than a third of my trades I know I’m going to hit my profit target before I ever hit the buy button. The remaining I monitor like a hawk for any type of weakness and exit them immediately when I see it. Enough ranting for now, good trading to all. Allen
I could only echo Allen’s wise words. There is [U]vastly[/U] more misinformation than good sound facts that will stand up to scrutiny and a live trading environment. And for good reason. Why would the informed participants be inclined to share their methodology ? If it goes viral around the forums…wooosh, it’s gone ! The reality is that before you can be a good trader, you have to be a bad one. How do you learn good judgement…only by experiencing bad judgement. So what’s the most common mistake for the new recruits ? Giving up when they can’t make what they’ve read work. Every component of your future success will come from first finding out what doesn’t work. As the great Thomas Edison once said “I haven’t failed, I’ve just found 10,000 ways that don’t work”. HH
loosing in forex is a mix of mistakes, its not about any one mistake its a series of mistakes and then not learning from it.
^ Over Trading.
Not realizing the entire forex industry, brokers, platform developers, websites, books are their to exploit your niavity and profit from you while ensuring they do not give you any advice or tools that may help you profit from them.
That’s considering market as gambling. They think they can win with their luck and skill, trade without planning anything, trade without stoploss. That’s the mistake 90% new trader makes.
Sometimes mistakes of one trader may be the component of a strategy of other trader. For example I focus only on one pair, can’t imagine spreading my attention to other pairs which will definitely cause confusion in my head…
Let me list the mistakes I made when I was starting out in late 2012.
1.) Didn’t have a plan. - I followed an ema crossover system blindly on 1h charts.
2.) Didn’t pay much attention to money management + risk reward ratio as I risked in “lots” I would buy a Micro lot or two whether it is GBP/JPY or USD/CAD. I should have decided my lot size depending on the stop loss.
3.) Had to use almost all of the indicators available
4.) Thought Price action trading was for pros and it had a huge learning curve.
5.) Traded on 15 min charts as I wanted to see the results as quickly as possible.
My thoughts on how I improved a bit. Note I am still learning and trading.
1.) Thank you Aaron Krugman and Jonathan Fox for your PA threads.
2.) Always look at weekly and daily charts
3.) Moved to higher time frames 4,6,8,12,D
4.) Risk as a percentage and stick to that whether it is 1% or 5%
5.) Pin bars are awesome!
6.) Forget about the news. With 10 different news events a day, I could not make up my mind to enter a trade. But please pay attention to them when you have open trades. Either close before NFP, Interest rates etc. or adjust the SL a bit to give some extra room.
7.) I have been using autochartist intraday analysis to make some more pips daily. Sometimes they work, sometimes they don’t.
As a newbie myself, acronyms often puzzle me. MT4? r/r ratio? Meta Trader 4 (5 now according to the metatrader site - risk to reward or reward to risk? - 2 more letters would define it - re/ri.
When you say “Should be 1:2” I’m thinking risk/reward, right?
Thanks for all the great insights. Have a great FX day, everyone.
probably, but there is no one biggest mistake, r:r is not something you can define over all
i think
and graft this on the stones of your ten commandments and speak them in my name when you come to remember me 3000 years from now :
“the biggest mistake anyone makes is to think that there is a system that works under any circumstance”
first commandment after the introductory ten that start with : do not spend more than what you could flush down the toilet without feeling it unless you’re desperate and it’s your only option left but crime