10 beginner mistakes

Mistakes of novice traders

A huge number of books and materials have been written on the forex market. There is so much information that it is rather difficult to digest it, and even more so to remember.

Of course, it takes time to master, and even more time will be spent on practicing practical skills and testing all those strategies and indicators that you will learn about in the process of learning to trade.

However, the most important aspect for any beginner is psychology: the main mistakes of novice traders are tied to it. If you can't control your emotions, don't stop living in chaos and treat trading like a game, this will not end well. More precisely, it will simply end, and much earlier than you would like.

Do not deprive yourself of the chance to understand Forex, gain real valuable knowledge and really feel the market! We have collected here 10 mistakes novice traders make: try to exclude them from your relationship with the market, and you will be rewarded with insights and good trading moments. Check it out!

Lack of experience

This is not so much a mistake as a fact that newbies do not want to put up with. Of course, the one who has spent long hours, weeks and months in front of the trading platform is much more likely to deal with the current situation on the chart than the one who has just opened the terminal.

Your task is to accept this fact and not pretend to be a smart guy. Yes, this is exactly what happens: traders do not want to learn, listen to analysts, and even more so - read books and watch economic news. For them, as they themselves believe, a couple of videos from the Internet and tips in social networks from experienced people are quite enough. However, this is far from the case: even if you understand the theory, read many books and watched dozens of webinars, this is far from a guarantee that in the real currency or stock market you will have the courage to discard emotions and find all those patterns that you know on the chart. ... Moreover, take into account the fundamental factors, receive the correct signals from the indicators, and before that - correctly configure them, somehow eliminating purely technical errors in exchange trading.

Even trained traders fall into a stupor, let alone those who did not even prepare for a meeting with the market!

So it's not worth playing heroes. In general, playing with the market is not a good idea. You can check it on your own deposit, or take our word for it. The second is certainly cheaper, but the first is much more convincing. The choice is yours.

Unreasonable expectations

This is both a mistake and a fact that everyone around you instills in you. The great traders of our time maintain accounts on social networks and “teach as it should”. Homebrew online courses instill confidence that "you make money with us." And financial market analysts warn that some traders are losing money - but they immediately tell you which indicators to put on the chart in order to “catch the trend”.

All this gives rise to the following thoughts in the trader's head: “So if a bunch of percent of people lose money in the foreign exchange and stock market, why set any indicators at all? Just tell me this thing doesn't work. Or - on the contrary, if indicators do not give any guarantees of earnings, then why use them? After all, the probability of making a profit with and without them is about the same, isn't it? And then I can do it myself now and earn extra money in a couple of days !? "

As a result - disappointment, losing trades, procrastination and negative reviews about Forex. Friends, don't do this: from this article you will learn the main mistakes of traders, you will be warned and armed. The matter is small: remove all illusions away; forget everything that you have heard before and start getting to know the market as a profession, from scratch. Each new hope for "earnings" is an almost guaranteed path to nowhere. Instead, see the next point.

Lack of a reliable trading plan

So this is it: you need a plan. A trading plan is a controlled number of both winning and losing trades for a certain period. When you have such a clear chart, worries about a failed deal will disappear from your life. Each of them will become a brick in a coherent trading system, and each loss will be just a line in the list, as well as profit.

In order for the plan to look serious and be perceived by your brain with due respect and attention, stop writing by hand on pieces of paper torn from a notebook. However, there is no need to complicate the trader's diary with unnecessary fields. It should be a visual spreadsheet that takes into account all aspects of your trading strategy - and you should definitely have one. If you do not yet understand what it is, how to develop this strategy with a plan, and what typical mistakes to take into account, it’s not scary. 

We also recommend reading the sections of the site about Fundamental and Technical Analysis, an article on Japanese candlestick patterns and other useful materials that can eradicate the typical mistakes of beginners from your trading practice.

Lack of discipline

The plan that you develop (see the previous point) will become a guiding star or navigator for you, showing you in which direction to move.

The market is plastic: it strongly depends on the psyche of the traders on the other side of the monitor. Your task is not to succumb to every provocation of price changes, but to stick to the plan. Its clause should work like an order for you. To date, the strategy you have developed (combining indicators and receiving signals from them) should play the role of a general. Received a signal - a deal is being opened. If I didn’t do it - put it aside and do nothing.

Trade only during the hours specified by your strategy. For example, if the selected indicator works well on GBPUSD, and you trade only during the opening of exchanges in London, do not worry about missing out on a move during the American session. The market is constantly moving up and down. "Historical" change of quotations occurs at an enviable frequency, which means that you are unlikely to "miss" the movement. Rather, save your nerves. Every rash and abrupt step is an approach to failure.

Submit yourself to the army of the market. It works!

Inability to use stop loss and take profit

This error can also be called "I will have time to close it with my hands." And then there was a snide answer: "No, you won't be in time."

What does this situation look like: a trader opens a deal and is going to sit and watch the price until the position gets out at least some plus, in order to quickly close it later. Some traders believe that 20 pips from opening a trade is too far for Take Profit, and 10 pips for Stop Loss is too close. Nobody wants to lose money, but to get the slightest profit - why not! Moreover, “I sit and follow the schedule; what can happen?"

And the following can happen: the price will suddenly turn around and drive your position into a minus. You don't have a stop loss, when will you close? Most likely, you won't at all, expecting that the situation will change, and still the schedule will go in your direction. As often happens, the price does not return anywhere, and you lose the amount on your account balance.

This can happen, for example, because while you were watching the price, important news came out, or a political speaker spoke out on a key national issue. The market reacted with lightning speed, and you did not know about it and did not expect.

To withstand such sudden drawdowns without Stop Loss and Take Profit, you must have an impressive deposit in your account. Literally unsinkable. Otherwise, you won't get very far without these two parameters of risk management.

Excess shoulder

Leverage can be both a powerful tool that really helps to increase profits, and a reason for a rapid loss of capital. In proportion to the growth of opportunities for opening a deal with a large volume, the risks also increase.

Your desires to “make money quicker” and “start trading with a minimum deposit, because there is no money” are popular mistakes of a novice trader. The market is not a place for instant enrichment! Perhaps the online casino will give you more chances of success in this case. Here, the odds are far from the 50/50 ratio, and therefore, when you choose a leverage of 1: 500 (for every dollar of yours, the broker allocates another 500 at the time of opening a deal), you risk 500 times more. There are still companies that thus increase the risks of their traders by 1000 times (1: 1000), and even more. The main question is: are these conditions beneficial to you?

In order to correctly answer it, it is necessary to clearly study how exactly leverage works, what happens, and why “I have little money” can easily turn into the phrase “oh, now there is no money at all”. 

In general terms, it is believed that the more positive trading experience you have, the higher leverage you can use. Also, the higher the volatility (volatility) and the swing range, the lower the leverage should be.

Too many open positions

Trader's mistakes usually boil down to the fact that you want to open for buy and sell, and for the pound, and for the euro, and for Apple ("why, the stocks are growing, and you said not to keep all your eggs in one basket") ...

Let's do this: first - one deal, then - another. First, one asset, then another. And not for the entire deposit, but for 10% of it.

Why only 10%? We return to the previous point. A small trade and a large residual equity in the account will help you survive a deep drawdown if it occurs. Otherwise, you can catch Stop Out, in which your positions will be closed one after another, since your account balance will not be able to provide them.

Psychologists have noticed that only up to 7 unrelated images can remain in the focus of a person's attention at the same time. This rule can be applied to the number of open trades that require close monitoring. If these are long-term transactions that you can forget about for days and weeks, then there may be more of them, but this is a long-term investment, not trading. The use of leverage in this case should be minimal.

An exception to this rule is a specially configured trading robot, whose task is to open many small transactions. However, you should create and run it only on condition that you understand what kind of algorithm you are putting into it, and how it will work.

The multi-positioner advisor should be tested on a demo account, and not only on historical quotes, but also on the real market. It is important to remember that trading with a high number of open trades is high-risk, that is, with increased risks of both losses and profits.

Maintaining unprofitable positions for too long

We talked about the fact that your balance should allow you to survive drawdowns, if you allowed them. However, this does not mean that you need to methodically fund your account while maintaining a deeply unprofitable position. So you will not earn, but on the contrary, you will start to lose money maniacally.

There is a simple rule for a novice trader in the red: it is always cheaper to close a trade than to close your eyes to it. And one more thing: a trend is your friend, unless it goes against you. Now, if you have already gone, you will have to agree with him and exit the market.

Ignoring changes in spread and the effect of spread on profit

When you plan to open a position, you need to remember that at the price that you see on the platform, the transaction will not be opened. There is a commission determined by the market and the broker: this is the difference between the bid price (Bid) and the ask price (Ask). Thus, your position will open slightly "worse" than the market: below or above the current price - just by the size of the spread.

Let's imagine a situation: you are going to trade on the news, and your broker usually widens the spread during this time. Instead of quickly entering the market and catching a price spike, you run into a loss that you still have to get out of. That is why every time before opening a position, you need to pay attention to the current spread size for the selected asset.

You can calculate all other parameters for a deal using online trading calculators.

Greed (thinking about "big money", not about sane money management)

If you want a lot of money, that's a great wish! But the market is not as predictable as you think, and this is where the main problem lies. There is nothing wrong with wanting profit and earnings. However, one must understand that neither their size, nor the very fact of their presence is guaranteed by anything or anyone. You can only count on the fact that the fate of your money is in your hands. How exactly you dispose of them, what you invest in and what deals you open, depends only on you. It's a nice power: Feel like a smart manager, not a gambler. After all, these are completely different statuses, don't you agree?

Of course, we have not listed all the mistakes of a trader in stock trading, but if you work through even these few points, your personal trading world will definitely get better!