The Things I did Wrong : Five Bad Mistakes I Made as a Forex Rookie

Certainly being new to forex trading is tough. The first thing we get is the impression that we can easily find financial freedom and that in no-time we will be able to get to those five or six figure incomes from a small investment of 200 or 500 dollars. To tell you the truth, the first year I traded forex I set myself a goal of earning 2000 USD per month starting up with a 500 USD deposit, this is how much I thought I could make trading the forex market. Of course, I had a reality check within that year and I had to leave this target for a much more “conservative” one – which wasn’t conservative at all – ending up again with another bump against the wall and another need for a reevaluation of how I was doing things. I have reflected extensively about these initial faults and I even keep the paper with the new year’s resolutions where I wrote – make 400%  USD per month – pasted onto my refrigerator door with a note saying :  “now I know better”.

What were the incredibly bad errors I committed within my first year of trading that led me to my first financial losses and this long journey to discover long term profitable trading ? Today I believe that most of these mistakes could have been avoided if I had read advice somewhere about this happening. Of course, as a new trader you are very reluctant to listen to anyone’s advice which does not reinforce your already faulted convictions but I think that if a new trader reads this post and realizes that he or she is on a similar path corrections can be made to make the journey less painful and the road towards long term profitability shorter. These were the five fatal mistakes I made within my first year of trading that made my financial losses larger and my road towards long term profitability much longer.

1. Didn’t understand risk. This is very important because I believe this caused me to lose my first account lightning fast. The truth is that when I started I barely understood what a lot was, what contract size represented and what I was actually doing when I entered a trade on the market. I didn’t understand how to calculate the amount of money lost/made per trade, my spread costs, what percentage of the account I was risking on each trade, etc. It is obvious that you need to absolutely dominate these concepts to achieve any sort of success in trading and you shouldn’t even touch a live account if you haven’t got a perfect grasp at the definitions of the above concepts as well as their implications. If you cannot calculate the lot size you need to trade to risk 2% of your account on a 100 pip stop loss on the EUR/JPY with a 10K USD deposit then you shouldn’t even be near a live trading account !

2. Chose my broker poorly. The fact is that when I started I didn’t know what I should be looking for within a broker. At the time when I started trading Metatrader 4 didn’t even exist and my choice was to trade with Forex.com. I made a 500 USD deposit on an account where my minimal lot size was one mini lot (one dollar per pip on the EUR/USD) and – obviously – this was financial suicide. More than 100% profit within the first week were quickly followed by a wipe out during the second. You need to choose your broker carefully so that you can manage your positions appropriate. If you understand how to calculate your risk per trade then you know how large or small your minimal lot size needs to be. Being ignorant about this is surely going to cause you a LOT of pain when learning how to trade.

3. I believed without evidence. Perhaps one of my largest mistakes was that I believed what people told me without needing to see true evidence of their claims. I believe that honest people believe others to be honest and sellers and other traders take advantage of this to tell you they have achieved something when they cannot prove it to you. If someone tells you that they are able to make X% per month then you should NEED incorruptible and absolutely reliable proof that this is true. A big part of why I had such a high profit expectancy when I started was that I believed many people were achieving these results when in reality absolutely no one was doing so consistently. Check online to see how many traders you can find with 5 year long investor access verified live statements, you’ll get an idea of how scarce long term profitability actually is.

4. Lack of a mentor. I have said a few times that mentor-ship is very important for success in trading since you can get an effective short-cut towards knowledge without financial loss. Lacking a successful trader to mentor me when I was starting made my journey extremely hard because it made be very prone to believe the hype and extremely unaware of the things I needed to do to achieve success. It is very difficult to start trading successfully when you don’t know anyone who has actually done this who can help you do the same. In my mind finding someone who can help you would be a huge advantage.

5. Lack of enough knowledge about myself. Most people who trade forex are totally ignorant about their behavior when trading money live when they first start. I have seen people trade demo accounts for a few months with great results only to go into a live account and lose large amounts of money due to psychological issues. The problem here is that to know yourself you need to trade live and to trade live and know yourself you need to lose money so it becomes an unavoidable cost that you need to pay in order to become a successful trader. The idea here is that you should trade a small account that you can trade with adequate risk targets per trade and by doing so you’ll be able to achieve a good amount of knowledge about yourself without going into strong financial loss.

Certainly there are many other things I did wrong when I started trading but I believe that the above 5 can be blamed for the loss of my initial accounts with very fast speeds. If I had had a much better understanding of the market, if I had chosen an account right for me and if I had had someone there to help me along the journey things would have been a thousand times easier. If you are just new to forex trading and you are reading this then I encourage to take the above advice, learn a lot about the theory behind risk management before starting to trade, do NOT believe what anyone tells you if there is no evidence behind it and find someone who has achieved success who can help you do the same. Following this advice certainly does not guarantee you will be successful, but your chances will be a lot higher than if you didn’t :o)

If you would like to learn more about forex trading and gain a true education about mechanical trading and how you can create your own automated strategies based on sound trading methods please consider joining Asirikuy.com, a website filled with educational videos, trading systems, development and a sound, honest and transparent approach to automated trading in general . I hope you enjoyed this article ! :o)

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2 Responses to “The Things I did Wrong : Five Bad Mistakes I Made as a Forex Rookie”

  1. Maxim says:

    Daniel,

    The only thing I can say regarding your article that I was lucky enough to discover your blog when was only 1 month into the trading journey. Your wish to share knowledge and endless help have allowed me to be profitable after 18 months.

    Maxim

    • admin says:

      Hello Maxim,

      Thank you very much for your comment :o) Definitely I am proud to see that my efforts have made you profitable and that you are right now on your way towards long term profitability ! Keep up the great effort Maxim :o)

      Best Regards,

      Daniel

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