Community Forex Questions
To become a great trader, you must avoid these 5 trading mistakes
Overtrading and being in too many trades at once
There is no doubt that this is the most classic mistake made by 100% of beginners and about 90% of others. The fact that about 90% of traders lose money over time is no surprise when about 90% of them trade too much. You may be trading too much if you find yourself in more than one trade at a time. Multi-tracking is illogical, and there is no logical reason to do so.
Chart-watching and thinking about trading too much
Over-trading is generally just thinking about trading too much. The most common mistake traders make is spending too much time flipping through the charts repeatedly, even when there are no obvious price action signals. Due to this, they end up entering a trade they wouldn't normally take if they were following their trading plan.
Short-time-frame charts: trying to make trading decisions
Day trading is one of the biggest mistakes new traders make. "Day trading" is a term that many people hear about without learning much else about it. As a result, they start trading off of short-time frames right from the start, such as the 5-minute or 1-minute charts, which leads to severe over-trading, gambling, and trading addiction.
You should never trade real money before you have tested yourself on a demo account
In spite of the fact that this mistake is like a death sentence for your money, beginning traders continue to make it time and time again. It is a mistake to trade with real money before you have even tried your strategy on a demo account. In most cases, traders don't understand the account and how it works, so they make silly mistakes such as risking more than they thought they were or not entering a stop loss properly. Of course, this results in them losing money.
Ignoring the fact that every trade has a random expectation
The biggest mistake most traders make about trading is not understanding that every trade they take has about an equal chance of being a loss or a gain. Now, that is not to say you cannot have a high-percentage winning strategy, because you can. But, the thing about trading is that for any given series of trades there is going to be a random outcome of wins and losses, so that means you never know the sequence of wins and losses in a sample size of trades. However, if you expect that your strategy will win 60% of the time, then you can expect that percentage to manifest over a large enough sample size.
There is no doubt that this is the most classic mistake made by 100% of beginners and about 90% of others. The fact that about 90% of traders lose money over time is no surprise when about 90% of them trade too much. You may be trading too much if you find yourself in more than one trade at a time. Multi-tracking is illogical, and there is no logical reason to do so.
Chart-watching and thinking about trading too much
Over-trading is generally just thinking about trading too much. The most common mistake traders make is spending too much time flipping through the charts repeatedly, even when there are no obvious price action signals. Due to this, they end up entering a trade they wouldn't normally take if they were following their trading plan.
Short-time-frame charts: trying to make trading decisions
Day trading is one of the biggest mistakes new traders make. "Day trading" is a term that many people hear about without learning much else about it. As a result, they start trading off of short-time frames right from the start, such as the 5-minute or 1-minute charts, which leads to severe over-trading, gambling, and trading addiction.
You should never trade real money before you have tested yourself on a demo account
In spite of the fact that this mistake is like a death sentence for your money, beginning traders continue to make it time and time again. It is a mistake to trade with real money before you have even tried your strategy on a demo account. In most cases, traders don't understand the account and how it works, so they make silly mistakes such as risking more than they thought they were or not entering a stop loss properly. Of course, this results in them losing money.
Ignoring the fact that every trade has a random expectation
The biggest mistake most traders make about trading is not understanding that every trade they take has about an equal chance of being a loss or a gain. Now, that is not to say you cannot have a high-percentage winning strategy, because you can. But, the thing about trading is that for any given series of trades there is going to be a random outcome of wins and losses, so that means you never know the sequence of wins and losses in a sample size of trades. However, if you expect that your strategy will win 60% of the time, then you can expect that percentage to manifest over a large enough sample size.
Aug 30, 2022 23:22