Beginner Trading Mistake – Stop Doing in Order to Succeed in Forex

by Mar 5, 2020Trading Psychology

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You are trading but you cannot stop making beginner trading mistake, losing all your money?

You open a trade and it is profitable. Open the next trade and again good one. Open the third trade and you lose all what you have won in the previous trades.

You again invest some money and repeat the same steps and you end up at the beginning.

Is this the case you are experiencing or you have heard someone saying he cannot get to far with trading on the Forex market?

I think both because it is common thing which happens almost to all traders on the Forex market. It is the same pattern we humans like to do, to destroy yourself in financial terms.

Is there a way how to overcome this problem and start being profitable by reducing trading mistakes?

The Solution

There is a solution but it is not so easy. When you read the solution you will say – oh, only that and I will be profitable?

Yes, only that. But be prepared to invest time and money in your education to become profitable and to overcome all problems you have. It will not be so easy as you think but it is possible.

Let the idea of being profitable carry you on this journey and to give you push when you start thinking of giving up.

Here is a list of problems that force you to make beginners trading mistakes. Also I am sharing information how to solve that problem in order to help you to start being successful.

1. Beginner Trading Mistake – No Education

Beginner trading mistake is not knowing that trading is one of the toughest professions out there and to succeed in trading you need to prepare yourself.

If you do not prepare yourself for trading you will not succeed and eventually you will lose all your money. But being prepared you can avoid beginner trading mistakes and you can be competitive in the Forex trading.

You have to think about trading like any job you are doing. You first need education about the job and your responsibilities. After you are well prepared you can continue with the work.

It is same in trading on the Forex market. Seek for professional help where you will learn all about trading. You need to understand how the market works and what strategy to use.

After the education is done you should know how the market moves and how to trade profitably. Being profitable is having wining trades increased and losing trades reduced.

Do not run before you can walk should be the saying you should follow.

2. Beginner Trading Mistake – No Trading Strategy

The trading strategy or trading plan is essential in the trading career. The trading strategy is a tool that will guide you to success and it is difference between beginner and professional trader.

Trading plan will help you avoid trading by the feelings where you are open to many mistakes that can happen during trading. Your feelings mostly bring bad trading decision where you lose your money.

When you trade without the trading plan where you open a trade by the rules in your head, you can expect that on some trades you will forget some rules. You will enter the trade based on less rules than you would with the trading plan where the steps are strictly written.

When the trade entered on the rules from your head become bad trade you will feel sad and angry why you did not follow the all the rules. That is why the trading plan have a checklist to enter the trade.

If you have a trading plan you are not left to your emotions and feelings but to steps and rules which you have set for yourself to be profitable. Many beginners do not invest enough time to make a trading plan.

You should avoid this beginner trading mistake and make a trading strategy.

3. Beginner Trading Mistake – No Risk Management

In trading you are using money to earn money. If the money is not controlled in some way you will lose that money.

Anything connected with using the money involves the risk and that risk must be controlled or you will lose the money. Trading on the Forex market involves the risk and you should identify how much you are willing to risk by each trade you open.

You need to have money and risk management rules written in your trading plan which you need to stick in order to be successful. The trading platform, Metatrader 4, have tools that can help you to implement the risk plan.

Those tools are Stop Loss and Take Profit level you can enter on each trade you open. And you should use those tools on each trade before the trade is open. With them you are one step closer to be professional trader.

Another tool is risk to reward ratio that defines how many wining trades you need to have to cover one bad trade in order to stay profitable.

Incorrect Risk Reward Ratio

Each trade you open should be by the risk management you have write down and which you should follow. By following the risk strategy you will know how much you will win and lose after certain number of trades.

Risk to Reward ratio should not be small because you want to profit after several trades. The profit should be small if it is not possible to be higher.

But having losses to be greater than winner does not make sense. So, plan to have at least 1:3 Risk:Reward ration so you can in profit after three trades.

That means, if you open three orders and one of them is losing one but the rest two of them are wining, at the end you will be in profit for one trade.

That is proper risk management and if it is possible you should increase that ratio. If it is not possible, even 1:3 is good one because in the long term you are profitable.

4. Beginner Trading Mistake – Wrong Broker

The beginner trading mistake that is right on the start of trading career is to find a reliable broker. It is not easy task and that is why beginners make a mistake very often.

You as a beginner do not know to much about issues you can face when using broker that is not reliable. So that is why you open an account with the one you find at first.

You do not check is the broker reliable, is he regulated, what other traders say about the broker, does the broker make a problem with withdrawals, do they have slippage, what is spread on currency pairs and so on….

When you open an account with a broker that is not reliable you can expect that you lose all your money after you deposit it on your trading account. Broker can stop answering to you and you cannot get your money back.

Check the Broker

If the broker is not regulated he can close your account without notice and take all your money.

These problems happens all the time and you can find many examples of scammed traders by their broker. Sadly, they did not check the broker before doing business with them.

This beginner trading mistake can be avoided if you pay attention on the main parts when selecting the broker. You can at least minimize possible problems by reading reviews from other traders.

Here you can read more about how to find a reliable broker so you minimize the risk: How to Find the Best Forex Broker

And you can use same broker as I am using which is checked by myself: GetKnowTrading Broker

5. Beginner Trading Mistake – No Stop Loss Order

Any trade you open should not have a beginner trading mistake and that is not setting the Stop Loss level. The Stop Loss level you should write down on the paper and stick it to the screen so you do not miss it.

Maybe you do not have hard Stop Loss and maybe you are closing your order by hand, but you need to have price at which the Stop will be activated. Do not let the idea that you do not need stop loss because the price will go in the right direction.

Each beginner have experienced the case when the trade did not go in the right direction.

It happens that the trader do not want to close the order because he thinks the price will bounce just on the next support or resistance. And the price comes to that level but pass through it without stopping.

Now the trader now becomes angry why the price did not reverse. He looks where is the next level that the price could stop. And eventually the price do not stop and the trader close the order or the margin call close the order.

Using the stop loss level you will prevent the above scenario and save yourself of pain. You will cut your loss and be ready for the next trade. That way you accept the loss on each trade and you show a maturity as a trader.

6. Beginner Trading Mistake – Averaging

When you open a trade and that trade is losing one what do you do on the next trade?

You double your investment hoping that you will cover your loss with the next trade. With the next trade you are trying to get even or even to earn money so your account balance is positive.

But, it happens that the next trade is also losing trade. You did not predict the correct price direction on the currency pair and you lose your money.

What do you to on the next trade?

You increase even more your investment and try to cover all previous losses. And even that trade does not succeed and eventually your wipe out your entire account balance.

This scenario is common among beginners and even among experienced traders who do not have a trading and risk management strategy.

Averaging losing trades is the most biggest beginner trading mistake you can make. You will ruin your account balance in very short time and you will be left with empty account balance.

Sadly, the gambling mentality is causing this problem where the trader wants to cover all losses with the next trade but the trader digs the whole even more deeper from which he cannot get out.

Take a look on this example:

1st loss : $100
2nd loss : $200
3rd loss : $400
4th loss : $800
5th loss : $1,600
6th loss : $3,200
7th loss : $6,400
8th loss : $12,800

7. Beginner Trading Mistake – Over Trading

Any beginner that wants to trade knows that to earn money you need to trade. So, they come to the trading station and start trading the whole day.

What do you think what happens in most cases?

They do not earn money.

Why they do not earn money because they are trading? If you work hard the reward will come at the end of the day? Right?

Sadly, trading is not like working on the constructing site. Trading do not demand to work hard physically but mentally.

If you trade to much you will make a beginner trading mistake called over trading. Over trading means opening to much trades in a day, hour or a week. There is no specific time frame.

Over trading means that you open to much trades that are not by the trading rules you have set in trading strategy. When you open to much trades you eventually lose the money.

You lose the money because you become affected by the thinking after losing the trade that the next trade will be profitable. And when that does not happen you open again new trade. And that ends by losing all your money.

You become impatient, eager to return the loss you have experienced. By seeking the revenge you open new trade where you think you will show the market how to trade.

Smaller Time Frame

Then you go to the lower time frame, like M1, M15 and M30 and open a lot new trades.

You cannot beat the market like that. You need to move to the higher time frame and open the trades only by the trading strategy rules. Rules are there to protect you from the situations like described above.

You have to realize, sooner than later, that the trading results depends on how well you trade and not how often you trade. You as a trader do not get payed by the hour traded but by the result you get from the market.

8. Beginner Trading Mistake – No Trading Journal

Trading on the Forex must be considered as a business and it should be treated as a business. Business should have a track of records of the past events in order to be fully covered for future events.

Those events can be planning for increasing revenue and for cutting the expenses. To increase the revenue and to cut the expenses you need to have something to see where you can do that.

Here comes the journal that helps to extract and filter those recordings. If you do not have journal you do not have necessary data.

Same case is in Forex trading. You need to have journal with all your orders, wining and losing, so you can make analysis on your trading results.

If you do not have a trading journal you are making beginner trading mistake. The information contained inside trading journal is highly valuable.

The information about trades you have took should have all thoughts when you open a trade and when you close the trade. That process should be done on each trade you open while trading.

After the trade is finished you should make analysis what was worked fine and what must be improved. If there is something that causing your trades being losing one you should write down and do not repeat same mistake.

If the trade is wining one, you should see what is working fine and if possible improve it more or leave as it is and just use it more.

Conclusion

The first step in fixing your mistakes is to acknowledge them so you aware of them. After that you know where you need to go. You should start searching the solution for those mistakes and become an expert in trading Forex market by knowing what are Forex basics.

Read more: How to be Profitable Part-Time Trader With 9 to 5 Job

Frano Grgić

Frano Grgić

A Forex trader since 2009. I like to share my knowledge and I like to analyze the markets. My goal is to have a website which will be the first choice for traders and beginners.

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