Perhaps I will sort out a selection of my mistakes by the degree of influence on the result. And also for each of these major mistakes, I will offer my own solution.
1. I want a lot and immediately
This is probably the most common mistake, not only specifically on the exchange, for every trader, but in general in everyday life, and it does not depend on the trading system or incorrectly placed stop losses. We are not ready to wait for almost anything. Entering the store, we are afraid of huge lines. When ordering some products over the Internet, we cannot wait for it to arrive. There is nothing to be done, this is the psychology of human behavior, and absolutely all people are like that. At the beginning of my journey, I, like everyone else, set myself certain goals. So, if you return to the first years of my practice on Forex, my goal was to earn 300,000 RUB per month. It’s 20 years old. I will not ask which of you makes so much money, I will ask who at least sets themselves a similar goal. I think not many. Where did such a goal come from? And she undertook after attending a free introductory seminar at one of the forex brokerage companies. I will not say what kind of company it was – there were hundreds of them. After the goal was set, of course, I was of little interest to another result. Of course, they kindly told me what needs to be done to earn money on the exchange. And I opened my first demo account. As far as I remember, it was at 5000 USD. Of course, I didn’t quite understand then that 300 000 RUB is approximately 10 000 USD approximately. That is, my goal was to earn $ 10,000 each month, having $ 5,000 on my account. It is now you, just like me, just grin. And then it was very serious. Well, about what came of it already on real accounts, I will talk along the way. At that time it seemed to me that this is a very real goal, especially that the broker automatically set the recommended transaction volume when completing a transaction in the trading terminal. It will not be amiss to say that the recommended leverage was much higher than even 1: 100. And one of the first random transactions made a profit of about 2000 USD. That’s all. Then I concluded that it was possible, and began to trade.
If you look at how the matter is with this error now, it’s even worse. There is such a parameter as the average time spent in a transaction. In simple words, this is the time that the average trader spends to complete one transaction. (Let me remind you that an offset operation is considered a transaction, that is, I bought/sold or opened/closed). In other words, this is the time from opening a transaction to closing it. So, even 5 years ago this time was several hours. And now? 3-4 minutes! And this time is reduced almost every day. It’s not worth explaining why. Everything is written above. The faster the speed of information exchange, the less we want to wait. As long as I am an active teacher of this subject, I communicate daily with people at classes and conferences. And I have my own statistics. So, if you take into account the opinion of newcomers, who recently came to the exchange to earn, then out of 10 people to the question: “how many transactions do you make per day?”, 9 people will answer that there are more than 10. But each of them will say that getting immediately and a lot is not realistic. That is, we subconsciously understand that exaggerated expectations are a mistake, but still, we think: “What if?”
If I say that there is a simple solution, I will lie. This problem is a matter of psychology, and solving any psychological problem is very difficult. How did I solve this problem for myself? Let’s just say that I managed to solve it partially. As before, I really do not like to wait, I really do not like queues in the store. But I can confidently say that when making real transactions on the stock exchange, the rush is not typical for me. When entering a deal, for example, for a month, of course, I want it to close profitably tomorrow, but I understand that the probability of this is very small. So, my way to solve this problem: before entering any transaction, calculate for yourself how much time is approximately necessary for the transaction to be completed. I understand perfectly well that for 99% of readers this task is essentially impossible. Many of you have never thought that the most important parameter in trading is time. Now I will not be able to describe exactly how to calculate this parameter, because this is a rather large amount of information (maybe then I will write an article about this). I will describe only a number of parameters that must be taken into account in order to roughly calculate the time. So, the main parameter is the average daily volatility of the instrument. In simple words, this is the average number of points that pass, for example, the EURUSD currency pair for one trading day. Each pair has a different parameter. For example, on EURUSD, at the moment, this is approximately 900 points. What will it give us? This will give an understanding of how much steam can pass per day. One way approximately 400-500 points. So, if you want to get 3000 points of profit from the transaction, the probability that this will happen in 1 day is practically 0. By experience, this is not even a week. This is only one of the parameters, but it is enough for a general understanding. So, you have now estimated that your deal is worth about a couple of weeks. And if you want to make a profit tomorrow or today, then this transaction is simply not for you. Believe me, if you realize how long it will take for a transaction, you will not wait for it to close after 5 minutes and be nervous, because the price is not going in your direction right now.
2. Earn a lot of one of your first deals
In general, this is not a mistake. This is just a coincidence. If you again bring my favorite statistics of communication with real people, it turns out that out of 10 beginning traders who are one of their first transactions, they earn a lot (no matter for what reason), all 10 lose their first deposit in the first month of work. I will say more, 7 out of these 10 are not even able to fix this profit. I had a real example. With a deposit of 3,000 USD, a profit of 1,900 USD was made in just an hour. As I remember now, it was a reaction to the news on EURUSD. So, at that moment when I saw this profit, I could not even realize it. I didn’t even have an idea that this profit should be fixed and rested. Instead, I decided to wait for the pair to grow further and bring me even more profit. The result was not long in coming – zeroing the deposit.
In the picture above, an excerpt from the page of my diary, which I kept at a time where Russian-speaking readers can read how I then reacted to this event. I admit that then, under the influence of emotions, I slightly lied about 5 points and the established Take Profit.
As I said, this is not a mistake. The mistake is not to fix this profit. But in that, and in another case, you will become confident that you can earn a lot, quickly and easily, but this is already a big mistake.
If I say that in case of obtaining high profitability, you need to immediately close the position, taking profit, turn off the computer and not approach it for another week- I will be absolutely right. But I know and understand that no one will ever do that. Yes, I myself will never do that. I think that this is how it should have happened, and with my head held high, I will continue to work. Thus I made a mistake, which I am trying to avoid to teach my students. When they ask me why I make mistakes myself, which I teach to avoid. I answer – “I’m just a man, not a robot.” Many immediately thought that since a person makes mistakes, why not trust the trading of robots, because they have no emotions, and, consequently, errors. Answer: Yes, robots have no emotions, but they make many more mistakes than people because people who often understand little in the financial markets write a program for them.