Going it Alone
With so much information freely available on the internet, it can be tempting to go it alone when it comes to learning to trade the forex markets.
There are some great free resources online such as babypips.com where you can learn the basics of trading but if you want to make a living from trading you need to find a mentor who can help guide you through the process.
Learning the theory isn’t too complicated but piecing it all together, building a plan suited to your available time and psychology, requires expert help and so before investing your money it is prudent to get this support.
Getting Married to the Trade
One of the first things we recommend you do is to get a trade plan created. This will help you avoid this second big mistake of getting married to the trade.
If you don’t have any rules to follow, then it’s very easy to fall into the trap of getting an emotional connection with trade and holding on for too long. The correct thing to do is to have rules in place that allow you to get out for a small loss if you are wrong rather than risk blowing up your account.
For some free tools that can help you implement good risk and money management, visit:
Trading Without a Plan
If you don’t have a trade plan, then you are already planning for failure. All professional traders have a trade plan with set rules that they must adhere to. This is the equivalent of a business plan and it’s a very important step to becoming a successful trader.
You can download a professional trade plan template directly using this link and also download our risk and money management sheet and professional trade journal londontradinginstitute.com/trading-tools.
Not Understanding Margin and Leverage
Margin and leverage are very powerful ways of maximising your capital if you know how to use them professionally. However, in the wrong hands, it is a sure fire way of blowing up your account.
For example, with some international brokers, you can have a leverage of 500 to 1. This is like borrowing 500 times more than your initial capital.
This is can be a disaster if the trade goes wrong and you don’t have a stop in place and its even possible to lose more than the capital you put in.
If you are looking for a get rich quick scheme, then trading is not for you. If you believe you can trade professionally without writing a trade plan and without regularly completing a trade journal of all your trades and reviewing them, then you are preparing yourself for a rude awakening. It is only a matter of time before you lose your capital. There is no worse feeling like a trader than blowing up all your money. If you are cutting corners, then your results will ultimately reflect this.
Biting off More than you can Chew
If you are a beginner in forex trading then it is better to learn to focus rather than trading everything in sight. It is much easier to become a specialist than it is to trade everything and never fully understand what you are trading.
Trading Too Many Asset Classes
If you are trying to trade multiple asset classes at the beginning it can be really challenging to keep up. There is so much going on that it’s almost impossible for a person on their own, to keep up and stay on top of things. It is better to choose FX to begin with and then once you are profitable you can move on to shares, futures trading, options trading systematic trading if this is something you are interested in.
Adding to Losing Positions
There is a strategy we teach in our career programmes where you can professionally add to a losing position. This is all part of the trading plan and it’s a great way of getting into a trade scaling in rather than taking a full position from the outset. It’s especially good if you don’t have a lot of time to sit in front of your screen.
However, in general, adding to a losing position without a plan is not a good idea at all and it’s a sure fire way to lose all your money. It means you are taking on more risk than you intended to and if the position doesn’t turn around the stress and ability to get out of the trade will get harder the longer the position moves against you. Don’t get into this practice and you will avoid a lot of pain.
Trading without a stop loss
If you don’t use a stop loss, then you are opening yourself to a disaster. A stop-loss gives you control with your trades and it allows you to professionally plan for the worst-case scenario. No one trade should put your career as a trader in jeopardy. Trading with rules is very important and a stop loss at a pre-determined level is very important to keep you in the game long enough.
Not Creating Your Own Path
If you think that you can simply follow someone else’s signals and make a lot of money trading, then sadly you are mistaken. It is very important that you get educated so you can understand why you are taking the trade in the first place and if it loses then you are better prepared for this. After all, you can’t always win but you can know why you lost or why you won and this is very important for your development as a trader.
If you would like to see how our traders educate you and show you the trades they are taking then you can try our elite trader’s club completely free at londontradinginstitute.com/elite-traders-club.