The old adage is that 95% of retail forex traders lose. If that’s true (which it pretty much is), then what you want to do as a trader is exactly the opposite of whatever it is that those traders are doing. This falls under the category of defining insanity, which is repeating the same thing over and over again while expecting a different outcome.
Mistake number 1: Having Goals
A huge problem with being a trader is that many of the things we’re taught to do in life are actually terrible for trading. For example, we’ve all heard how important it is to have goals but in trading, you should have one goal and one goal only-making a profit. Once you realize that your only goal should be to make a profit, it will free your mind towards achieving that end without regard to how it’s done.
For example, my goal is to make a profit, but I’m not looking for a certain amount of pips per week or percentage gain in a certain amount of time. The reason is because I know that having a goal to make a certain amount within a given time period is likely to force me into a trade for the sake of being in one. What I’m really looking to do is to wait for the right time and the set up that’s right for me.
Mistake Number 2: Treating Trading Like A Job
Having a job means that you are going somewhere for a specific amount of time during which you’re being paid to produce something. Many traders will treat trading the same way; they set aside 2 or 3 hours a day and during that time they are looking for a trade because they feel that time is their “working time.”
I don’t set a schedule for my trading because I never know from one day to the next where the best trading opportunities will be. I try to keep abreast of things as best I can because I know there’s a lot of information to keep track of and I don’t exactly know when something will happen that will cause the market to move.
Mistake Number 3: Letting Emotions Get In The Way
This one works both ways because while getting to “down” on yourself after a losing trade will damage your confidence, getting too “high” from a winning trade can be just as dangerous. I don’t consider myself to be an idiot after I have a loser, and I don’t think I’m a genius just because I made a few bucks. It’s essential to keep yourself on an even emotional keel. Remember that with every trade lies the potential for glory or disaster. No one ever masters the market. Every trade is a learning experience.
Mistake Number 4: Ignoring The Law Of Supply And Demand
If you don’t know this basic economic fundamental, go look it up. If you do, just know that the Fed has control of the supply. You don’t need to have a deep understanding of all the intricacies regarding monetary policy; all you need to know is when the Fed is increasing or decreasing supply. It isn’t even important to know why they’re doing it (from a trading perspective), just be aware of whether supply is waxing or waning.
That being said, it’s to your advantage to learn as much as possible. The more ahead you can be on the information curve, the better are your chances of having a successful trading career. At the least, you should be aware of how recent economic data is printing and you definitely should always read FOMC statements, comparing the new one to the previous.