The biggest mistake new traders make is trying too hard to make a profit and being unwilling to a loss.
Imagine it like this, You learn that if you hold a trade open long enough, it will come back and show you a profit. This lesson is quickly confirmed because 9 out of 10 times it will. Particularly when you grab a profit as soon as it is on offer.
So as new traders do, you start with $1000 and open some trades and see some great success!
trade 1: $10 profit
trade 2: $5 profit
trade 3: $22 profit
trade 4: $2.50 profit
You realise at this point, that even if a trade moves -$100 against you, it can easily come back in your favor. So you tell yourself, all good, just don’t set a stop loss and the trade will always swing back in your favour. This is easy!
trade 5: $12 profit
Trade 6: $1.50 profit (WOW, that last one was a close one, it went -$250 against me. So you tell yourself if that happens again, you will close the trade in a loss. $250 is the MAX!).
trade 7: $80 profit (sh!t, is trading easy or am I just that dam good! I’ve got 100% accuracy and am thinking of quitting my job and trading for a living. Yer, maybe in Thailand on a beach!)
trade 8: $10 profit
trade 9: $25 profit
On the 10th trade, the market moves against you. A massive -$250 against you, (dam, maybe I should get out. Well, let’s see how it goes, I don’t want to lose $250, it’s too much money!)
You see the trade go further and further against you -$500 (you’re sweating bullets now), then -$750 (jezz, I’ll get out when it comes back to -$250, dear lord let this trade go back to -$250!)
Trump the comes out and jawbones the USD dollar. You were long and that trade goes soaring against you into a margin call - the entire account is GONE!
I am very happy to admit this is exactly what I did when I was new, and a few times after too.
I learnt if you cant take a small loss, you won’t take a big loss and you will end up being forced to take a massive loss!