They say that experience is the best teacher. Unfortunately, this method tends to give you the test first before the lessons.
This week we’ll try to get the next best thing. What’s (almost) better than learning from your mistakes? Learning from others’ mistakes, of course!
A couple of months ago we asked forex traders in our Facebook community:
Let’s take a look at some of their answers:
“You never can be sure where prices go.”
– Denis Kuzmin
One of the most common reasons why forex traders fail is that they would rather be right than be profitable.
But price (action) is king even if you’ve spent hours on your technical and fundamental analyses. The sooner you learn that you’ll be wrong (a lot), the sooner you can cut your losses and avoid deeper drawdowns.
Boredom is one of the most underrated risks of forex trading.
“Do not take a trade simply because one feels like it sometimes”
– Emma Liu
There will be times when there’s just not that much action in the market or your trading system simply isn’t catching any of the moves.
Taking a trade just to have a trade is similar to abandoning your trading plan.
You’re risking a position that’s not within your tried-and-tested parameters, so there’s a bigger chance that the trade will end with a loss.
“Patience….. Don’t be greedy… Use small lot sizes according to your balance…”
– Agnes E. Mpofu
If you increase your size just to get bigger profits, or if you use larger units to make up for a previous loss, then you’ll be more susceptible to making emotional rather than rational decisions.
Position size is a double-edged sword. It can make you big profits, but it can also cause big losses as well.
Your position size should always be determined by the size of your account. Start with 1% – 2% of your account per position and find out which level works out best for you.
“Don’t open too many trades.”
– Sfundo You
There are plenty of reasons why traders open multiple positions. Some don’t want to miss any action and want to earn money quicker while others think they can speed up their learning process by taking a lot of trades.
But unless you can successfully watch over and execute each and every open position, you’ll do better to take fewer trades. Like with large position sizes, one trade too many can push you into making decisions based on emotions.
“Trade on higher time frames.”
– Pablo Espinosa
This one is more of a personal preference, but something that you should learn for yourself as soon as you can. Do you like trading shorter or longer time frames? Do you prefer specific currency pairs? Do you favor certain indicators?
Identify your trading personality so you can concentrate on taking setups that work best for you.
“Strictly follow your strategy (risk reward)”
– Mohammad Akbar Baloch
This one is a no-brainer. There’s a reason why you made your trading plan. It’s a product of your researches and experiences.
Still, there are many reasons why traders ditch their trading plans. Read up so you can make a habit of not breaking them.
“Always have a bottle of Jack Daniels handy… You either neck a shot each time you turn a profit, or drown your sorrow each time you take a loss. Literally a win-win situation.”
– Gus Macduff
Haven’t tried this myself, but can’t argue with “literally a win-win situation!”
That’s it for this batch of trading nuggets from other forex traders!
How about you? What’s the most important lesson you’ve learned in your first month of forex trading?