3. Lack of experience
At this point, you can dump the blame for almost all losing trades. This can include the low level of basic financial literacy among most traders, a general lack of understanding of the processes taking place on the exchange, ignorance of the basic principles of pricing, and much, much more. But I will try to specify. In this paragraph, I will talk about the lack of experience in monitoring the progress of bidding. In other words, we do not know what to expect from the price at the next moment in time and are completely unprepared for movements that we have never seen.
This problem is faced by absolutely all beginners who take their first steps on the exchange. We open a trading terminal – and everything there is new to us. We see a price chart and see how this price moves. But we, perhaps, have never seen how one day of trading on the D1 timeframe looks like. We were taught in introductory courses to watch and monitor how quickly the price jumps – and it amuses us and creates excitement. And we never switched to large time frames, because there, at least, it is not interesting. Nothing rides there but just stands still. Perhaps if we were taught on large timeframes, we would understand that the price can pass a large number of points sharply. But in those moments, we did not even suspect this. We made deals in huge volumes for a small number of points and believed that this will always be the case, and that is how the market goes. But when situations happened that one candle on the chart was the size of the entire monitor screen – this shocked us, and joy gave way to despair and hopelessness. Why am I writing about this so easily? I went through all this myself.
Nevertheless, my biggest mistake at the initial stage of studying financial markets, I consider the constant reading of the Internet and analytical articles. The modern Internet is simply clogged with information about financial markets, especially for the forex market. Numerous gurus rush to share their “expert” opinions for mere pennies, sell all kinds of “super” trading strategies, conduct seminars and workshops that are absolutely useless from a practical point of view, which they don’t say anything practical, but only boast about their own, supposedly successful deals. And what remains for us newcomers? Never mind. Under the weight of all this information field, which is called “near the market” on the sidelines, we give up and constantly listen, read, delve, thereby moving farther and farther away from the original goal. One of the visitors to my seminar once said that he has already lost count, how many seminars and training courses he attended. To my question – “Why?”. He thought for 5 seconds and said, “Yes because the habit is already like that.” At the beginning of my journey, I myself listened to a huge number of different seminars, bought a whole bunch of CDs with training courses, and how many analytical articles I read. And only after about 5 years, I began to realize that all this is empty and does not carry any practical meaning.
Here is my slogan with which I go through life in the world of finance: do not listen to anyone who says that he understands your money more than you do. Do not read analytics, do not believe in trading signals that do not belong to you. Do not waste time reading what you can write to yourself! Can you write an article like this from your own perspective? If you can, then close my article. You have enough experience to earn on your own. Go ahead, practice and gain experience! And here we will continue for now … After reading the slogan, a quite logical question should arise in my head: “But how then to learn to trade, if you don’t read anything?”. Firstly, what you have read so far will be enough for you. Secondly, it is possible and necessary to read and study. You just need to know what to read. From myself, I can give advice. Modern trading literature is not worth reading. 99% of this literature is written in order to provoke you to start trading faster and spend your money. And then, the bulk of books and textbooks are now published by authors who themselves have lost their money on the exchange, and in order to at least slightly compensate for the losses, they publish their books in circulation. Learn from those whose performance on the exchange you can evaluate and see in reality. If someone tells you that he is a successful trader with millionth accounts, but lives in a rented apartment … Well, you understand. Warren Buffett, Benjamin Graham, George Soros (be he not good). Yes, some of this list, to put it mildly, are not very decent people. But they are brilliant traders with publicly available and well-known statistics. Their success is known to all. In addition, each of them has published more than one book about their operations on the exchange. This kind of literature is worth reading, only these books have something to learn. And do not be afraid that they are basically about securities markets. Believe me, the principles of pricing are the same in all markets. The most useful book for me was:
4. Misunderstanding of what you are doing.
Here is one of the most common causes of loss. In my memory, as a rule, it was associated with strong emotional outbursts. Basically, these spikes happen when you make a successful transaction or a series of successful transactions. It happened to me that I made a long series of successful transactions.
I continue to publish excerpts from my diary, which will soon have an anniversary of 10 years. Here is just one of such a series of successful transactions. What all this led to can be seen even in the current frame. The last deal in the series is very different from others. Can you tell me what? Look at the amount of profit and the number of points of profit. 5 points are equivalent to 40 USD. This is a volume of 1 lot! The leverage that I then used was close to 1: 1000. And previous deals were a smaller lot. In other words, even then I believed that my system was indestructible. How much I was wrong. It’s now I am re-reading these lines with a smile, and then I was serious and enthusiastic. The end of this deposit will be documented a little later. Then I absolutely did not understand what I was doing, and what it could lead to.
The euphoria of successful transactions will haunt you constantly. Regardless of whether you are in the market for 10 years or 10 days. It is simply a chemical process in the human body. I’ll tell you more, your brain absolutely doesn’t care whether your trade is profitable or unprofitable. For him, it’s just an emotion. So, there is only one solution: Having made a successful transaction, get up from the computer and get distracted for at least 5 minutes from the trading process. Go to the store, spend the money. In general, get another emotion that is not related to the market. It is very difficult. Therefore, the solution is both possible and not actual. If I managed to accustom myself to follow this rule, why can’t you?