Financial markets are changing from time to time, how you stay successful over a long time. Remember forex is a marathon and not a sprint, all those who use it as sprint don’t make it over a long time. Have you heard of someone who made a lot of money in 1 month than later you don’t hear anything from him? That what happens when you become speedy Gonzalez in the market, the market will take all your money and spit you on the blown account side and you will walk around saying forex is a scam, while it just you who came with the wrong mentality. People who take it slow and accumulate their profit make it because they understand the market. Lucky for you, you met me before you became speedy Gonzalez. I’ll take you step by step to what separates successful from unsuccessful traders. Below are points to look out for in order to succeed in forex.
- Gambling mentality – a lot of traders come into the market with a mentality of that markets are the easiest way to being rich. That a very dangerous mentality it one of the reasons why those traders fail to follow rules like risking 1 or 2% in the market. Another reason is these fake gurus who lie to the people in order to sell trading materials that don’t work. Remember trading without stop-loss is same as gambling. It takes one day and your whole account is gone, you won’t believe it.
- Skipping demo stage – demo trading provides the easiest way to test yourself without risking anything, I know you thinking now trading on the demo is not the same as trading on the real account. Yeah, that true but if your strategy doesn’t work on a demo they is no way it will work on the real account. Markets is the same in the demo and real account, the difference is emotions involved with your real money. Just a friendly tip on using a demo account, you need to ensure that you use the same amount of money that you will afford to deposit on real account. It useless to trade with big account while when you deposit for real account you will deposit 100 USD.
- Bad risk to reward ratio – no matter how good as a trader if your risk to reward ratio is bad, you will struggle to make money and become frustrated. They is nothing frustrating than having a good strategy that wins you over 50% trades but you still not making money. If you take trades that offer you less than what you will get if it goes your way, you are still in the dark. In money management course I mentioned that I only enter the trade if it gives me a risk to reward ratio of 1:2, 1:1 need a good strategy that always right. I can guarantee you they are very few, Elliot wave is one of them if applied correctly.
- Risking too much – this is associated with gambling mentality and bad risk to reward ratio. People who risk too much what to be rich overnight. I’m not against the idea that trading can make you a fortune but you need to follow some rules to get that fortune. The advice I always give to people is to always risk less than 5% of your whole capital, the lesser the better. You will find losing streak where you lose a lot of trades in arrow, that shouldn’t wipe up out empty in your trading account, you must live to fight another day.
- Multiple time-frame – always pick the one-time frame you trade and use the relevant time frame for analyzing only not to set your stop loss and take profit. Give you an example if you normal trade on one hour, stick to it don’t jump to 1 day and place a trade because using your strategy on 1 day will cost you lot if you lose trade. The candle on 1 day is bigger than the 1 hour one, your losses will be increased if you lose. You can use bigger time frame to get a bigger picture of the market and come back to look for a better entry on the lower time frame. I trade 4-hour time frame so I use 1 day, weekly to get the bigger view of the market where we going. Great traders always worry about how much they will lose before entering a trade.
- Relying too much on indicators – This one burns a lot of new traders including myself when I was still new. I thought at one time that crossing moving average was going to make me rich until the market started being choppy and all the profits made during trending condition was gone. Well, I didn’t have good money management anyway but point is that indicators work in one market condition and not in the other one. Like indicator that does well in trending markets usually not good at ranging times. If you see my charts on this websites I don’t even have a single indicator, and I’m successful that way. Some Elliot wavers use one oscillator like RSI or MACD which is fine because they use it differently to what new trader uses it.
- Psychological factors – greed and fear come in mind if I think about this, unsuccessful traders let their losing trades run till it hit stop loss or blow account or they cut their winning trades short. Cutting your winning trades before they reach your take profit and letting your losing trade reach your stop-loss is bad for your account it shows you suffering from psychological factors. If you become excited when you win trades and becomes sad when losing, double check your risk you are risking too much in the market. They are no guarantees in forex trading, always risk what you are willing to lose as markets can be unpredictable sometimes.
- Changing different strategies – some traders are guilty of changing strategies left side and center, today his trading this after few loses his changing to another one. He gets lucky and win few trades and becomes excited think his going to be rich, then beginners luck end and again change strategy. I’m not saying don’t change strategy if it doesn’t work for you, but keep in mind that in order to understand some strategies you need time and lot of hard working. Like Elliot wave, for example, it a good strategy but you need time to work on it over and over and over in order to master it and become successful in the market.