7 Rookie Trading Mistakes That Will Make You Another Statistic
Forex trading is one of the most challenging ventures a person could probably undertake in their life. Going to the gym and building muscle won’t help you, nor will going to university and getting a fancy degree. This job requires psychological features of strength, which most new traders do not have, and sadly may never get.
Successful trading basically comes down to how disciplined you are. You might have the best strategy in the world but if your head isn’t in the right place, you will end up just being another statistic.
Most traders are disappointed with the unlimited money making potential of the market against their own performance, and are acting out of emotions like desperation, greed or fear to try and close the gap. Here are 7 reasons which are classic tell-tale signs that a trader is self-sabotaging their chances of success. Can you reflect on any of the following…?
Random Decisions/No consistency
You’ve got a 50/50 chance of winning a trade right? I mean the market is either going to move up and down, so if you take an educated guess you should be able to make money yeah? Well for those who have tried this will have no doubt discovered that lack of consistency in trading is not lucrative.
Sure the market can only move in one direction, but for how long before it reverses. You get plenty of days where the market will move up, down, back up then down again. How many times would your stop have been triggered chasing price around like this? It would be super frustrating.
Most people find Forex trading very attractive because it gives a person complete control, breaking free of all the rules from their day to day life. Unfortunately the Forex market requires rules, structure and consistency at an even more intense level than your daily life does. So if you’re looking to operate ‘rule free’, then trading is probably not for you.
Trading under emotion
We already spoke about trading being the ultimate psychological challenge of life. A lot of the market participants are human aside from all the trading algorithms, so the market is one giant psychological machine. If you display emotional weakness, the market will exploit your emotions and use them against you, taking your hard earned money.
A lot of traders take on Forex trading because they want to use it to fix some underlying financial problem in their life, or just want to generate fast money. Trading for the wrong reasons will make you vulnerable to emotional fuelled mistakes because you’ve got ‘too much at stake’.
It’s important that you only enter the market with the investor attitude, looking to gain positive ROI over a sensible amount of time. The market should not be the solution to get the debt collector off your back.
Like any other profession, Forex is something that takes time. You can’t expect to walk into a job, inexperienced, and expect to be promoted to the manager the next day. Forex trading requires a learning phase essential to conditioning yourself, and to build a compatible mind-set for the markets.
Trading is probably unlike anything you’ve ever experienced. Your day to day life does not prepare you for it. The logic learned from the outside world can’t be applied successfully to the markets, the two just don’t mix. Before throwing in large amounts of your savings into the markets, make sure you’ve had a good dose of experience first.
The statistics tell us that a high amount of traders blow their accounts, and that figure will be even more dominant for new traders. If you’re new to the industry, its best you invest smaller amounts first to ‘get your feet wet’ before jumping in the deep end.
Trying to understand too many things/Over complication
Generally in the outside world, the more complicated something is, the better it is. Think of computers, the more complicated they get, the better they perform thanks to technology advances.
Trading is not like that, if you make your trading complicated then you will end up becoming a vegetable. There is a huge amount of trading systems out there, and most of them are just too intense. Too many of these systems bring in all these extra external variables onto the charts. Things like indicators, expert advisors, economic figures or other ‘magic’ trading tools.
All the extra data on your chart makes the system confusing, overwhelming and frustrating. Multiple variables often conflicting with one another, so the more you bring in, the harder chart analysis becomes. Simple works better in the market guys, that’s why I am a passionate price action trader, working of raw price charts.
If your chart looks like the cockpit for NASA’s space flight control, then it’s probably a time for a change. Clean up your charts, and switch to a trading system that makes sense to you. Something that’s logical, straight forward and doesn’t have a negative impact on your day to day life.