Trading in the financial markets is booming now and I am starting to see so many “FOREX traders” popping up all over the place. I love the idea but I wish they fulling understand what they are doing to help them actually succeed in the business.
As a giver, I want to share with traders today on what can kill them in their trading career. All from my personal experience.
1- Wrong mindset:
Many traders come into the trading business with really bad and dangerous mindsets. They see a guy on YouTube claiming to be a trader flaunting a Ferrari and some cash telling them he can make them like that in a few days with a so-called system.
They get in and they started seeing it’s not as easy as that YouTube guy is making it look. Most actually get burnt and lose all their capital.
Mostly because they want to get rich quick. Well for me this only happened to me when I was still trading a demo account, thank God for the right mentors around me.
Trading is not a get rich quick scheme like MMM, it’s a real business where people take a real risk to get real returns.
2- Impatient/Over Trading:
When I just started trading, I thought the more trades I take the more money I’d make. Let me not lie that was one of my worst times as a trader.
I was always wanting to get into a trade, it was now looking like a really bad addiction. I was even trying to trade 1-minute charts. Like seriously, Joshua?
When you’re impatient you tend to make a lot of fundamental trading mistakes. E.g. entry a trade that your entry tactic is about to confirm, which can then lead to over trading, which can then lead to you losing a lot of money.
3- No record-keeping:
Most new traders ignore record keeping and management, including me those days. Maybe because it looks like work.
Let me not lie to your trading is “WORK!”. It’s not just about entries and exits, you have to learn to do the real work. That’s what the pros do. It’s what I do.
If you’re a lazy person this business is not for you. Learn to keep records, so you can learn from your mistakes and know what the hell you’re actually doing.
4- Over Leverage:
Leverage is the ability to do more with less. It’s a good thing but when mismanaged you can get burnt.
As traders we want gains and we want it as fast as possible. As a result of that most inexperienced traders trade recklessly because their brokers gave them 1:500 leverage.
That means they can drop $1 to buy something that’s worth $500. Most traders abuse this. Leverage can increase your gains and can also increase your loss! When you hear someone say I turned $15 to $95 overnight just know they are using too much leverage, especially if they are beginners.
We pros don’t do that! We are too smart for such nonsense.
5- No stop loss:
Trading without a place where you tell yourself you are wrong and get out of a losing position is just foolishness to me.
How the hell do you manage your position size and trade risk without that?
I used to feel whenever my stop got hit, the trade will reverse and start going to my original direction. What I did was to stop you Stop Loss, men it was not fun as I started holding losing positions for too long.
This made my risk to reward ratio wacky! With a bad risk to reward ratio, you’re almost certain of losing in the long term.
6- Paying high spreads and commissions:
This is an error mostly made by inexperienced day traders, of course, you all know I am not a day trader. I used today trade though when I just started learning to trade, I hated it. I’ll like the article I stated my reasons.
When you use a really bad broker you can pay too much in spread and commissions. That can add up to something tangible that can affect your profitability over time.
One way to avoid this is to try not to day trade too volatile assets and exotic FOREX pair, of you, must trade those, trade them longer term.
Hmm, I kept this for last because I actually think this is a trader’s greatest enemy. This enemy does not come from losing streaks but from winning streaks.
When you start having a lot of wins back to back or made a lot of money so quickly. Euphoria can kick in; you may start to feel like you’ve cracked the markets.
These “sweet” feelings can make you lose money because it can make you throw all your rules away and start feeling like a market god which you are not! and may likely never be!
I remember a period in my learning curve, I was having a lot of easy wins with a system I was testing before I knew it, euphoria came into me and I started increasing my position size higher than normal. I lost all the gain from my winning streak.
My losses got me into another mode, the revenge mode! Which made me lose more and more money until I got a little depressed and decided to stop trading for a while.
So, watch your feelings when you’re having wins back to back.
I’m happy for you if you actually read through this post as you have saved yourself a lot of wasted time and money if you actually avoid these silly mistakes that can kill you as a trader.
Much love from me to you. Have a great 2020!
Do you wish to learn FOREX Trading? Join the group here SMART MONEY COMMUNITY
ABOUT THE WRITER
My name is Joshua Eriaborosan OFOMAJA (JEO), I solve investment and marketing/business problems for individuals and businesses.