Three Gigantic Mistakes When It Comes to Trading Forex
A lot of people have asked me what I would consider the most major error to make when trading. Well, I wouldn't put my finger on just one, so what I've done is boiled it down to 3 goof-ups that I think are probably the most glaring and damaging. These aren't in any particular order because they vary from one trader to the next.
Choose the Best Forex Brokers Right Now!
The first major mistake is coming into the game with flawed expectations. This is usually a result of having read of some system that promises to make huge amounts of money while you're off golfing or lying on the beach. So that's what you expect to happen when you start your forex trading career. I cringe when I see this, because it's yet another promise of "get rich quick" in forex, and I think it tarnishes the forex business unfairly. Unfortunately a lot of aspiring traders don't take the time to truly understand the way trading works. The problem arises when you don't have the right mindset and expectations in the first place. So when a series of adverse moves does come along (and at some point that will happen), it can be psychologically very challenging to continue trading with the same methodology, even though there may be nothing wrong with it.
The second gigantic mistake is the lack of a consistent approach. This is the category that "system chasers" fall into. They never find out if their system works, or more importantly, if they can become a consistent trader because they never trade one approach long enough to find out! Usually after a few losses using the "hot" system that was supposed to make them rich quickly, traders tend to get back on the internet and find the latest, greatest system. I know because I've coached so many people who have given up in utter frustration and have come to me for help, at which point I tell them the absolute truth, and that is your trading system, while important, is only one piece of the puzzle in forex trading.
This brings us to the third gigantic mistake, and that's risk management. Risk management really means 2 things: Money management (or account management) and trade management. Money management refers to how much of your account you lay on the line every time you trade. We usually talk about this in terms of percentage of total account value. How much of your account do you risk when you trade? This is so vital that you can have a terrible system in terms of accuracy, yet with prudent money management (and trade management), you can be profitable, and in fact you can be very profitable! Trade management refers to how you manage a trade once you're in it. This part of trading is also vital. Key factors such as how big your stop loss is, when you move your stop loss to lock in profit, when you take profit, etc, will have a huge impact on your trading account.
I hope you've found these tips helpful. If you pay attention to just these 3 errors alone (expectations, a consistent approach, and risk management), I promise, you'll be very glad you did.
Choose the Best Forex Brokers Right Now.
Start Your Forex Trading Journey!
