Don’t Make This 7 Mistakes in Trading


In 2009, George Clooney starred in the Oscar-nominated film Up in the Air, a story about a corporate executioner who spends 322 days out of the year on the road. His character, Ryan Bingham, is an efficiency expert who knows all the shortcuts to get through security checkpoints swiftly so he can spend the shortest amount of time waiting for his plane. I may not fly nearly as much as Bingham, but when I do, I like to test cutoff times and arrive at the airport minutes before my flight boards. My tendency to wait until the 11th hour before arriving at the airport drives my coworkers, friends, and family nuts. Most people I know get to the airport one and a half hours before a domestic flight and three hours before an international flight. Yes, these are the Transportation Security Administration’s recommendations, but they are designed for the casual traveler and not the Ryan Binghams of the world. Like Bingham, I always check-in online, print out my boarding pass, make sure there are no liquids, aerosols, or gels in my carry-on luggage, and know that my frequent flier elite status allows me to bypass long security lines. For domestic flights, I usually arrive at the airport no more than 45 minutes before boarding, and for international flights no more than 90 minutes. Have I ever missed a flight? Only once when I was headed to Italy for vacation. Did I learn from my mistake? Nope, because in the 10 years and hundreds of flights since then, I have never missed another flight-and it was not because I started to arrive at the airport earlier. Should most people do as I do? Probably not. The main reason I wait until the last minute to head to the airport is that I can squeeze in a few extra hours of sleep or an extra hour of work, and the worst that can happen is I will get bumped onto the next flight. I factor in the worst-case scenario before every flight and know that it can be handled with a phone call and some patience.

However, not everyone can afford to miss their flight because of connections or appointments. The same goes for trading-not everyone can afford to make a ton of mistakes. Part of trading is about managing the trade and part of it is about managing ourselves. We all have our own level of risk tolerance, but having met thousands of successful and unsuccessful forex traders, I can tell you that most forex traders make the same mistakes. In general, human emotions can kill profits. Some traders become so frustrated that they decide to codify their trading rules, which basically lets the computer do all of the work and eliminates human intervention. However, computers can’t adjust to changing market environments.

Most of the mistakes that traders make are not new; for those people who are able to avoid them from the very beginning, the path to successful trading will be smoother. Whether you’re new to forex trading or have made some mistakes already, review this list of Top 10 Mistakes of Forex Traders and hopefully, it will save you a lot of time and money.

Mistake #1: Having Unrealistic Expectations.

I will by no means neglect the time that I encountered an excessively keen dealer at a foreign exchange expo who requested me if my buying and selling returns had been higher than the ones of the winners of foreign exchange buying and selling contests. I answered with the aid of using pronouncing, “Considering that the winners make between 500 and 3,000 percentage go back in a single month, which might equate to every year go back of 6,000 to 360,000 percentage, there’s an excellent risk that he’s taking quite a few chances, buying and selling irrationally, the use of a method that he might by no means use if he had been buying and selling a wide quantity of actual money.” Usually, those contests are both for demo buying and selling accounts: minis and micros in which the common account length is between $500 and $2,500. Even the nice hedge fund managers withinside the global aren’t capable of making 1,000 percent go back, not to mention 360,000 percent go back on a constant basis. Having unrealistic expectancies encourages extra chance-taking, which is one of the number one motives many new buyers blow up their accounts. Seasoned foreign exchange buyers are glad if they are able to beat the overall performance of the S&P 500 and elated if they are able to always generate double-digit returns each year. The key to being a successful foreign exchange dealer is to technique it like every other asset magnificence and to assume affordable and now no longer sky-excessive returns.

Mistake #2: Taking Highly Correlated Trades.

What many new buyers fail to comprehend is that currencies will regularly circulate withinside the identical path. For example, on any given day, if the Australian greenback is up towards the U.S. greenback, there’s an excellent risk that the New Zealand greenback is preferred as well. Many new foreign exchange buyers will study their charts and notice that the AUD/USD and NZD/USD are breaking out at an identical time and could naively pass lengthy each currency. However, with the aid of using doing so, the dealer is largely doubling up at the identical position. This redundant publicity can be intentional, however for maximum new buyers it in all likelihood isn’t, which may be a massive mistake due to the fact if one comes crashing down, there is a great risk the alternative will follow. The purpose currencies will circulate withinside the identical path is the U.S. greenback. On maximum days, the U.S. greenback might be both up towards all the foremost currencies or down. The importance of the actions might be exceptional, which can be a purpose that a dealer has determined to unfold his chance among the AUD/USD and NZD/USD, however, if that isn’t the intention, then in place of being diversified, the publicity is exceedingly concentrated, which creates a hidden chance withinside the positions.

Mistake #3: Failing to Use a Stop.

Another query this is requested regularly at change suggests is the significance of the use of a stop. I am usually greatly surprised to discover that many foreign exchange buyers do now no longer accept as true the use of stops. Their argument is that in the event that they do now no longer use a stop, the foreign money will finally get again to their preliminary entry. This is proper till it isn’t. When the fashion in currencies is strong, it could circulate aggressively in a single path with little retracement. Eventually, it is able to get again to previous levels, however, that would take days, weeks, months, and on occasion even years. Unfortunately, markets can live irrational a long way longer than maximum human beings can live solvent, because of this that there might not be sufficient fairness withinside the account to final till the foreign money pair subsequently receives again to its previous level. It is going with out pronouncing that each buyer must use a stop. Trading at its center is in the long run an workout in controlling the chaotic and regularly unpredictable markets. If you do now no longer use a stop, you’re at the mercy of the marketplace and lose all manipulation of your change. At that time, the nice factor to reflect on consideration is whether or not the change might nonetheless be appealing in case you had been now no longer already withinside the position.

Mistake #4: Taking Unnecessary Risks.

New Yorkers are notoriously responsible for jaywalking. Even 80year-antique grandmothers will keep away from strolling to the give up of the road and expecting the mild to trade earlier than crossing. However, whenever I even have visible an older individual jaywalk it’s far over the weekend and withinside the early morning while a maximum of the metropolis remains sleeping. With many years of existence experience, grandmothers and grandfathers understand that it’s far ways much less volatile to jaywalk at a time while the metropolis is abandoned in a place this is tremendously quiet than in the course of rush hour in Times Square. In fact, they could likely by no means jaywalk at that point and in that insanity due to the fact it’s far a useless danger. When it involves buying and selling, conserving a function over the weekend while the finance ministers and principal bankers are conserving a summit is an instance of taking a useless danger. The final results of those conferences are many times unpredictable and might cause an opening open on Sunday evening. Staying on the pinnacle of upcoming information releases and activities can assist new buyers to keep away from exposing the location to useless risks.

Mistake #5: Taking on Too Much Leverage.

In 2008 once I traveled to Dubai for the first actual time and we have been using down Sheikh Zayed Road, that’s equal to Las Vegas Boulevard, I couldn’t assist however observe the glamorous homes and the severa production tasks in the process. It felt like 1/2 of the world’s cranes have been in a 5-mile radius. Gulf News places it at nearer to twenty percent on the time, which remains tremendous. Yet, thinking about that one factor the number of production people rivaled the quantity of Dubai citizens, it becomes clear that belongings builders have been over-leveraged and a bubble becomes forming. When the bubble have become too big, because it did withinside the United States, it burst, inflicting fees to fall 60 percent from their peak. The subprime became an economic disaster and become a hard lesson in over-leveraging. the Forex market agents will lure character buyers with very beneficial quantities of leverage, however risking something extra than five to ten percent of your account on any one alternate is economic suicide. Leverage is a fantastic drug while the alternate actions on your direction, however, it’s far natural poison while the marketplace is aligned towards you.

Mistake #6: Over-Optimizing Your Strategy.

Trading robots have emerged as very famous during the last few years, and savvier buyers have even found out to code their very own buying and selling techniques and create mini algos. However, the largest mistake that those buyers make is over-optimizing their strategy. What may match flawlessly in single marketplace surroundings will now no longer be paintings so properly in others. Having spent an outstanding deal of time developing systematic buying and selling products, I even have found out that maximum robots or algos paintings in both fashion or variety however hardly ever in both. So if a person is displaying you backtested outcomes with 1,000 percentage returns, you need to be extraordinarily skeptical due to the fact they’ve likely over-optimized their robotic to expose you to an excellent report so one can be tough to duplicate in reality. Markets are dynamic and their drivers trade with time; therefore, it’s far critical to apply the proper techniques withinside the proper buying and selling environments. For instance, making use of fashion-following or breakout buying and selling techniques in quiet variety-certain environments will typically cause greater losers than winners.

Mistake #7: Becoming a Demo Billionaire.

Finally, do not emerge as a demo billionaire. Nothing can update stay buying and selling. According to my enterprise partner, who likes to play video video games together along with his son, buying and selling a demo is like gambling Halo three and wondering which you are equipped for war. The second you listen to a shell explode close to you in actual existence, you’ll pee your pants. Just the fact you could make a 500 percent go back on your demo would not imply that you may be capable of doing the identical in a stay account. Once you begin to see losses of $1,000 or $five,000, anxiousness will purpose you to impeach whether or not you need to stay withinside the alternate. One of the particular benefits of the foreign exchange marketplace is that agents offer new buyers exceptionally sized accounts, which lets them ease into stay buying and selling. After making a steady income at the demo, open up a mini buying and selling account with a small quantity of throwaway cash. Make certain you could deal with the mental detail of buying and selling actual cash earlier than you dedicate extra quantities of capital.

Regardless of your danger tolerance, or whether or not you arrive at the airport an hour or 3 hours earlier than a flight, no one loves to make a mistake. Reviewing this listing of the Top 10 Mistakes may prevent you from making one. Just make certain that you have a terrific purpose for going into and out of every alternate and do not get emotional!

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