5 Common Mistakes Newbie Traders Usually Make

It never easy being a newbie. Whether it’s in taking on a new job, starting your own business, or trying out a different sport, the degree of uncertainty in a new and unfamiliar undertaking can sometimes be overwhelming and push you to commit mistakes.

Forex trading is no different. Here are five of the most common mistakes that newbie traders make:
1. Trading Without a Plan or Journaling

Even noobs fresh out of the School of Pipsology and in their first week of trading know that the forex market is as unpredictable as the next plot twist on Game of Thrones.


More often than not, in the attempt to make the most out of the opportunities the market presents, you get so lost in the emotions that you forget what you’re supposed to do.

Think of Frodo in the Lord of the Rings. He was tasked to destroy the ring but in his journey towards Mt. Doom in Mordor, he lost focus on his mission.

forex planWith your own money on the line, you wouldn’t want to be like Frodo when you’re trading, would you? I don’t think so. To help you achieve your goal, which is to become a consistently profitable trader, you need a trading plan and a forex trading journal.

It can be a simple outline of your entry and exit conditions and risk management rules, and it needs to be written down any place that you can refer to, record and review your progress. Your trading plan and forex journal will be your best bud, like your very own Samwise Gamgee, and your journal will be like a pseudo self-coach who will keep you focused on your mission when market forces drive you crazy.
2. Not Setting a Stop Loss

Trading without a stop loss is equivalent to cleaning the top floor windows of the Empire State building without a harness. Sure, there will be some days that you’ll be able to do your job and clean windows, but once you fall off… Well, let’s just say it’s you won’t be cleaning windows any time in the future!

Face it, you won’t always make the right calls. And that’s perfectly normal. But you’ll need stop loss points – even just mental ones – to make sure that you are able to survive and fight another day when you do lose a trade. Instead of account-wiping forex trades, all you have are these small, manageable, and recoverable losses.
3. Revenge Trading

Revenge trading is when you get emotional over a lost trade and try to aggressively recuperate the loss.

Often times, revenge trades have twice or even thrice the position size of the previous losing forex trade. Revenge traders do this hoping that the account is taken back to positive territory as quickly as possible. In gambling, they call this “doubling up.”

While it may be difficult, it’s always best to accept the loss outright and not let your judgment be clouded by your ego. Instead of revenge trading, focus your efforts and energy on analyzing what went wrong and figure out what you can do to improve your subsequent trades.
4. Letting Losers Run

Another common mistake that newbie traders make is allowing their losing trades to simply run all the way to their stops instead of cutting losses early. You might be thinking “Oh well, I’ve set a limit on my losses anyway. I think I can handle it,” while crossing your fingers that the price reverses and moves in your favor sooner or later.

The problem with this mentality is that, even though you’ve already determined at which level your trade will get invalidated, you might be missing out on signals that tell you to exit your trade early.

This could come in the form of a freshly released economic report that can cause price to move against you or maybe a candlestick pattern that suggests the price could reverse.

Think of it this way: If you let your losers run and close your winning forex trades early, you’d end up with losers that are bigger than winners. That won’t exactly tilt the odds in your favor, would it?
5. Having Unrealistic Expectations

Having goals in trading can help you stay motivated and disciplined. Without them, how are you supposed to keep your game face on? But, as I mentioned in my article about setting goals that work, it is important to make sure that these expectations are realistic.

Making a truckload of pips every single day sounds awesome, but is it possible? Maybe with a great deal of experience and skill thrown in with some luck, but let’s be realistic–that doesn’t exactly describe the typical noob.

With that expectation, you might just be setting yourself up for daily doses of disappointment when you repeatedly fail to achieve such a stratospheric goal.

What’s important is that you set realistic expectations and goals, and at the same time take concrete steps to enable you to achieve these goals.

If you’ve committed some of these mistakes, don’t feel bad. I’m 100% sure you’re not the only one and we’d love to hear your story. Share your experience with the world by leaving a comment below or sharing your experience in trading discussions. Maybe you’ll meet a trader or two who share the same experiences with you!

As world-renowned leadership expert John C. Maxwell once said, “A man must be big enough to admit his mistakes, smart enough to profit from them, and strong enough to correct them.”

By acknowledging your faults or mistakes, you’re already a step closer to becoming a better trader. Now it’s time to learn from them and turn those bad trading habits into good ones… Good luck!

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What Real Life Traders Learned After a Month of Forex Trading

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:

“What’s the most important lesson you’ve learned after a month of trading currencies?”

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.

“Do not take a trade simply because one feels like it sometimes”
– Emma Liu

Boredom is one of the most underrated risks of forex trading.

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?

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Why Hybrid Trading Might Work Better For You

For those who aren’t comfortable with purely mechanical systems or those who get carried away by their emotions in using a 100% discretionary approach, a hybrid trading style could work better for you.

If applied properly, this type of trading can combine the best of both worlds and be a better way to trade for you.

What’s the difference between a mechanical and discretionary trading style anyway?

hybrid forexA purely mechanical system requires the trader to trust a system of signals based on price based indicators to give valid entry/exit points to produce profits over the long run.

Since all you have to do is wait for a valid signal and take the trade, using a mechanical system can eliminate the psychological aspect (fear and greed) out of your trading decision.

But while trading emotion free can be great, there will be times when the mechanical system gives trade signals that don’t jive with the current fundamental bias or market environment.

On the other hand, a purely discretionary trading approach involves taking trades based on where your own analysis of fundamentals, price action, or risk sentiment. While this type of trading takes the current market environment into account, it could to lead to inconsistent results when applied by a trader easily influenced by emotions and/or personal biases.

How can a hybrid trading approach solve all that?

Hybrid trading combines the objective trading rules of a mechanical system with discretionary decisions of the trader based on dominant market themes, current risk sentiment, price action, and recent economic events.

The advantage of using a hybrid system is that the system is developed on your understanding of the market and YOUR trading personality. Ideally, the system will incorporate the indicators and parameters that you are most comfortable with and intuitively understand.

By using a hybrid system, you can choose to take the trades that make the most sense. Remember that one drawback of taking a purely mechanical system is that it cannot distinguish between changing market environments.

Let’s say that the market has been ranging lately and you get a signal to go short. However, your system is a trend-following system and you feel that if you take the signal, you are just going to get chopped up.

By incorporating a hybrid system, you can use your ability to adapt to the current market conditions to override the signal, therefore enhancing your system and avoiding possible losses.

Be careful though, as this is where it can be very tricky. If one were to simply override all the trade signals without any basis (like past price action), then what would be the point of having a system at all?

Always keep in mind that the subjective part of a hybrid system is meant to compliment the system’s trading rules in order to maximize profits – not to ignore it completely!

Hmm, that sounds doable. So where do I start?

As tricky as the hybrid system can be, the preparation needed is pretty simple.

You can begin by keeping a record of how price reacted to news reports, different market themes, and market structures.

Documenting price action might be tedious and labor-intensive at first, but with A LOT of deliberate practice, it will help you develop a knack for spotting similar setups in the future. After all, the phrase “history repeats itself” didn’t become famous for no reason.

Of course, identifying similar setups is only half the battle. Since you’re combining mechanical AND discretionary trading, you also need to practice the subjective part of your decision-making.

One good way of preparing is by asking questions like “Is market environment the same as the past setup that I recorded? What will I do if price doesn’t react the same way?” By verifying your discretion with past price action, you can increase the probability of making good trade decisions with your hybrid trading approach.

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3 Ways to Keep Your Confidence During Trading Slump

Thinking about Keeping up your confidence during trading , we will help you do it.
Slumps are inevitable in trading. They come with the market’s ever-changing environment, and even successful traders go through them.so how to keepup confidence during trading ?

I once heard a story about a trader who went through 48 months in a row without having a single negative month. On average, he made about $2,000 a day during this period. And then all of a sudden his streak came to an end and he went through a long slump wherein he couldn’t string together two profitable months in a row.

In such stressful times, it’s very easy to beat yourself up, focus on what you’re doing wrong, and overlook the things you’ve been doing right. It’s part of human nature!
[caption width="300" align="alignnone"] Confidence During Trading[/caption]
It can be argued that being hard on yourself is a way of addressing your problems. But it can become more of a bane than a boon to your trading if you get caught up in all the pessimism.

When the mind is zoned in on all the negative aspects of your trading, there’s a tendency to lose sight of the positive aspects that brought you success in the past.

It’s for this reason that I believe it’s better to focus your attention on banking on your strengths in times when you’re in a slump. Go back to the basics, as they say!

On the flipside, when you’re trading well, your attention should be shifted to the improvements that you can still make.

Doing so will help keep your trading confidence at proper levels. Remember, having low confidence can be just as bad for you as being overconfident!

Here are some steps you can take to stay positive during a trading slump:
1. Don’t simply dwell on the problem. Act on it.

As I mentioned in one of my articles about correcting bad trading habits, you should try to be more conscious of your trade decisions.

You can do this by talking out loud while trading or by journaling your trade decisions. Taking note of your thoughts and feelings during a trade can help you identify what you’re doing wrong so that you can work on cutting those bad habits later on.
2. Review those trades that worked well for you.

Having a detailed trading journal should come in handy at this point so I sure hope you have one!

By keeping track of the proper trade decisions you’ve made and the profitable setups you’ve taken, you’ll be able to identify which ones are effective for you. Also, reminding yourself that you were able to catch some good moves in the past would serve as a nice boost for your ego.
3. Find your trading niche.

Niche trading is all about specializing and focusing on what works well for you. You see, some traders aren’t able to perform well because there’s a mismatch between their personalities and their trading styles.

To avoid this, ask yourself the following questions:

What am I good at?
What are my strengths and weaknesses as a trader?
What are the qualities that can make me successful?

You might also want to take our Personality Quizzes in the School of Pipsology to help you find the answers to questions such as the following: Which currency pair should I trade? Which trading style is best for me? What kind of mechanical system suits my personality?

Bear in mind that one of the biggest challenges in trading is to stay focused and positive, even when your account balance is turning negative.

By making sure that your confidence remains intact, you’ll have a better chance of making it out of a slump. Remember to focus on the process and not solely on the profits.

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Are You Forcing Your Forex Trades? you should avaoid it now

How can you stop forcing your forex trades
At some point during your trading experience, you might have felt like the market is out to get you and that absolutely nothing is going your way.

In these situations, do you a.) take a step back to regain focus or b.) try harder and prove that you can catch pips no matter what?

If the latter applies to you more often than not, then you might be prone to forcing your trades.

Forcing trades usually means taking trades that don’t meet your trading rules, though it could also mean taking positions that are too large or trading too often for your comfort levels.

These trading no-no’s often take place when one is bent on making things happen instead of simply reacting to what is happening.

Remember that some characteristics of a successful trader, such as being competitive and aggressive, can also be potential pitfalls.

A highly competitive trader, for example, might have trouble staying calm and collected while in the middle of a nasty losing streak, and eventually resort to overtrading, revenge trading, or over-leveraging just to make his or her money back.

So, how do you avoid the temptation of forcing your trades? The answer, according to my favorite trading psychologist Dr. Brett Steenbarger, is to turn your rules into habits.

Like in any habit formation, the hardest part is at the beginning.

For forex traders, this is the part where you force yourself to follow your tried-and-tested rules on position sizing, leveraging, stop loss placements, and risk management. Write down your rules and follow a check list if it helps.

The process gets easier as you develop a rhythm and see the (hopefully positive) results of strictly sticking to your plans.

When you trust your own system and you don’t want to fix something that ain’t broke, then you’ll be less tempted to force your trades the next time you feel the urge to do it.

If you haven’t found a set of trading rules that would keep you away from forced trades, then all you need to do is remember that profitable traders stay ahead of the rest of the pack because they make decisions based on probabilities and not on emotions.

Consistently profitable traders recognize that trading is a dance where the market ALWAYS takes the lead.

If you attempt to lead the market by anticipating future price action, or find beats (read: opportunities) where there aren’t any, then you could fall flat on your face and miss out on the more profitable moves.

Remember that trading is a marathon and not a sprint. The goal is to trade for another day until you learn how to be consistently profitable with your strategies. Don’t sabotage your progress by forcing your trades.

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When It’s Okay to Take a Break From Forex Trading

you needa break from forex trading ?
You’re like a deer in the headlight staring at your screens, feeling overwhelmed by all the new information and forex market movements.

You feel the pressure to perform. You haven’t made a winning trade all week.

The bills are due and your checking account is running low. You don’t know what you’re going to do. You’re becoming desperate and you swear to yourself “I’m going to push myself to make some pips.”

forex vacationUnfortunately, the more you tell yourself this, the more stressed and more upset you become. It’s time to chill, dude! Or do as Big Pippin does: put on some music, grab a glass of wine, and take a bubble bath.

In these situations, it’s natural to feel that you must push yourself to the limits to make a profit. Depending on your abilities and resources, be careful that you don’t push yourself too hard. You might make matters worse.

Forex trading is a profession where you can convince yourself that your work is never done. There’s always another chart to read, an economic report to digest, or a new trading strategy to create or test.

When it’s been some time since you’ve made a winning trade, you start to feel that you absolutely positively must make a profit. And with the forex market open 24 hours a day, you feel like there’s absolutely no excuse to miss out on any profit opportunities.

But unless you are a seasoned forex trading veteran, pushing yourself to the limits will only add to your frustration. Suddenly, you can’t seem to get anything done. Applying additional stress on yourself doesn’t always increase performance levels. Stress and performance work according to what scientists call an “inverted U curve”.

Here’s how the inverted U-curve works in a nutshell. When a task is easy, like running around the block, a high level of stress enhances performance, but when a task is difficult and intellectually challenging, such as devising a profitable trading strategy, a high level of stress impedes performance.

Stress, even a small amount, saps up limited psychological energy. When you put stress on yourself to trade more profitably, you’ll find that you start to feel a little tired. And if you push yourself too far, and go way beyond your abilities, you’ll eventually exhaust all your stored psychological energy. And die. Okay, I’m just kidding. Maybe.

When you feel stressed out because you are putting pressure on yourself, try reducing some of the pressure.

Tell yourself, “I’m not going to keep pushing myself. I’m just going to come up with a modest goal and work at it one minute at a time, and then maybe, one hour at time. I’ll just give it my best effort.”

See what happens when you try this thinking strategy. You’ll find that you’ll harness a little more energy just by simply taking some of the pressure off. Taking a break in the middle of a stressful day can also do wonders. Step outside, take a walk and soak up the sunshine. It will release some pent up stressful and negative energy.

You can also try a simple form of meditation. Go to a quiet place, and simply repeat this mantra, “I accept what I can get out of the market.”

Repeat it over and over again. Concentrate on the words and let your worries about the markets disappear from your consciousness. You’ll feel a little better, and you’ll feel your energy level rise.

If you are a seasoned trader, pushing yourself to reach higher and higher standards of excellence can produce higher levels of performance. But if you are a novice trader, pushing yourself beyond your limits usually leads to frustration, stress, and eventual exhaustion.

When you have pushed yourself so far that you feel the pressure, STOP! Take a chill pill. Accept your limitations and relax. Ironically, you’ll feel a little energy boost and will suddenly feel empowered. At that point, you’ll be ready to tackle the forex market again, and grab those positive pips.

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