This time, we will do some reverse engineering and therefore we will talk about the common weaknesses of new traders (that I personally seen and did in the past) and see whether you can work out your improvement plan from that. Of course this topic is well covered by other websites and blogs so bear with me if you find the content seems to be "Arrghhh... I know about that" sort of thing. No worries, more importantly, have you done something about it? Of course I don't care but just be true to yourself.
Let's begin.
1. Impulsive - Too Excited and Jumping into Trades
Impulsive trading will always be the top of my list. It is hard to see a new trader to take it easy when they look at the charts and price action. They always get excited without even blinking their eyes when they look at the candlestick movement. Though the daily and 4 hour chart is clearly bullish, they can simply jump and get excited from the 5 minutes (even 1 Minute) candlestick showing a bearish move and say "yeah... it's going down and it's good to sell now" and straight away trigger a SELL order. Wow! I cannot say anything since their confidence is higher than the Mount Everest. Stopping them seems impossible since it's their account but you can guess for sure how the story ends.
THE CURE TO THIS - Stay cool and relax, always.
2. Emotional - Married to their positions due to Weak Psychology
As a result of their impulsiveness and blindness in analyzing the market properly, they will hold their losing positions and cut their profit short when they get it right. A perfect recipe for a loser. I am not saying that they should cut their losses the moment the trade turns RED (your position will always start with red color because of the spread) or let a profitable trade (BLUE) turn to a losing trade by holding it too long. All they need is just to build their ability and confidence to analyse and understand what triggers that trade in the first place, by planning a reasonable TP and SL target before entering any position. Once enter, they should be able to hold it accordingly until their system or rule says to exit.
THE CURE TO THIS - Risk Small, decide on the Risk Reward ratio prior to entry and get ready to lose if you get it wrong. Stay objective with your approach based on probabilities rather than blind hope.
3. Market Chaser - Adrenaline Rush
This is another common problem ranked 3rd in my list. No doubt some new traders have system and method that are taught by their mentors and gurus. But the problem is, they cannot wait for the setup to come and they enter the market regardless what the condition is. I do not blame them 100% on this though since I have seen some mentors are giving their signals and entry methods on time-based rather than technical levels to assess. How can anyone knew for certain that you can buy or sell any currency pair 2 hours from now? If the setup does not meet the required criteria, it is always best to remain patience, stay out and wait until the technical signals give you the green light to enter. This is discipline.
THE CURE TO THIS - Relax. If there is a reason for you not to enter a trade, just stay out. It's all about patience and discipline. Let the market comes to you.
4. Risk Management - Poor
Poor risk management is always the No 1 reason for account destruction and margin calls. Most new traders do not even have this in their trading arsenal and therefore, taking every trade using the maximum leverage hoping for a home run in every single trade. They ALWAYS TAKE BIG RISK! Hoping for big money to flow in. Occasionally they will get it right. But one bad trade will surely put them out of the market permanently, wiping their account out unless they can cut their losses really fast. They believe that if they can succeed in demo, they surely can do the same thing with the real account. Of course the truth is otherwise since there is no emotional factor when trading with the demo money. Those with no risk management is definitely operating their live account like a time bomb. It's just a matter of when, not how.
THE CURE TO THIS - Risk Small, knowing how much at stakes if you get it wrong. Always have an SL, or escape plan in case if the market goes against you.
5. Technical Knowledge - Lacking
This is the core to market analysis. No doubt I have seen traders making profit purely from the price action. But knowing additional things (e.g. MA, Fibo, Support & Resistance) from the technical perspective would really help your decision making. So many times new traders are trapped with blind situations and blame the brokers (even the market) cheating them due to reverse market movement once they enter a trade position. Once I checked, the level they entered was just nice within certain key technical levels (i.e. support, resistance and even key fibonacci levels) where the likeliness of market bounce and reversal was very high. Initially I myself do not pay much attention to these technical indicators. But after being trapped and blinded by certain market move, I realized that it is a key component to my trading decision that I couldn't ignore. You don't have to know and use every single indicators in your trading platform, enough with the basics that I mentioned above, and explore more as the time goes by.
THE CURE TO THIS - Take time to learn one indicator at a time, and practice using them with your demo account first until you become more familiar and comfortable with it.
6. Fundamental Knowledge - Lacking
Same thing like technical, it would really help if you can take time to understand and appreciate the relevant issues with regard to all currency pairs (or commodities) that you are trading. Price movement are driven by human's fear and greed. Hence, on top of your technical analysis, you need to appreciate the sentiment behind it that drives the trend towards either bullishness or bearishness. Key things like the economic calendar events are something that you really cannot take for granted especially when it come to central banks latest financial and fiscal policy. These elements can either make or break your technical analysis so it deserves some serious attention and respect. Period.
THE CURE TO THIS - Take time to read and appreciate the current global issues plus the upcoming economic (and geopolitical) events on your calendar like the US Presidential Election as well as all BREXIT matters.
7. Want Everything Quick and Easy - Greed
Most new traders want to do it the fast way. They just want the signals and all its associated parameters without asking and knowing why. Some even dump their money on others to trade for them. They don't have time to learn and yet they dream of making lots of money from trading. If you have lots of money, this is where the more experienced traders will capitalize on you and taking you for a ride. There is no harm in such intention since everyone wants quick and easy money. It's just that when you don't really understand and appreciate the art behind it, you will always be caught on the bad signals given especially when your risk parameters are not well defined. So learning is still mandatory in a way, since ignorance will really place you in a disadvantage situation especially in the long run.
THE CURE TO THIS - Allocate time to learn and always put realistic target. Investment is like sowing a tree. It takes time to grow and same goes to your financial plan. Don't be scammed and lured by the Lamborghini cars and party on the boats advertisement since those are cheap tricks that work all the time, especially to the ignorance. Wake up! Nothing comes easy guys.
8. Full of Excuses - No time, Lazy & Busy
New traders hardly be true to themselves. They thought they knew this and that already and seldom listen to advice. This is the reason why I am a bit picky when someone approach me to learn about forex. From my experience, 9 out of 10 always want the short cuts. They always want the easy way. No wonder so many out there are easily scammed since the universal crowd will always behave in such a way. Unless they change their mindset, there is no point to dream about being a successful trader.
THE CURE TO THIS - This is attitude. If you don't change it, no one will. It's your choice.
9. No Entry Method and Trade Strategy - Gambler
New traders can accelerate their learning curve if they are willing to apply a particular system or approach to their trading style. But what I see out there, either their mentor are not giving them the right technique or they themselves fail to discipline themselves to follow on what have been taught to them. Furthermore, the lack of effort to learn and explore different techniques available also contribute to the reason why new traders are stuck at certain level and later quit in the end. If you don't establish certain rules or setup parameter for you to trigger a trade (e.g. when the 3EMA cross the 21 EMA upways, it's a buy signal setup), you keep on guessing and trigger your trade without a clear technical rule to follow. As such, it is hard to be consistent with your trade performance.
THE CURE TO THIS - Find a mentor, or books that you can refer to as guidance. Try multiple techniques with your demo account and assess the result. Later transfer them to your real account and evaluate the result as well. With this approach you will keep on learning and discover which technique that suits you most. No doubt over time, you will improve yourself.
10. No Trading Journal - No record of mistakes and keep on repeating them
A Trading Journal is just like your Trading Diary. This is where you keep all your records, thoughts and experiences that you encounter each day. It doesn't have to be microscopic detail since what's important is for you to record the one that matters so that you can improve your performance each day. By doing this, you will automatically learn to be true to yourself. Since this journal is only meant for your eyes, you can write anything about your trading (& thoughts) so there is nothing to be ashamed of regardless how stupid it may sound. Trust me, do this and you can see the difference.
THE CURE TO THIS - Start your trading journal today. Don't delay anymore. You can do it with your Excel file and create several folders to record your winning and losing trades, account levels, your mistakes, your thoughts, your analysis as well as your strategies.
SUMMARY
If you realize, all these points are actually related to one another. The reason I break it into pieces just to make it more specific so that it can be tackled objectively. Worse of all, I even met few new traders who thought that they have the experience already, though they just started 3 months ago. While I appreciate the confidence level, they should have listen more than do the talking.
You see even with considerable number of years of experience that I have, I never feel enough. I always read and put my thoughts inside my trading journal on daily basis. Hence, I always appreciate every moment spent with my fellow friends and traders, regardless new or seasoned, since there will always something new to learn. What more if he is more experience and knowledgeable than the rest. I only talk when asked rather than trying to prove how knowledgeable I am with the group. I have nothing to prove basically since most of the time, I always strive to improve myself from one day to another, believing that learning is an endless process. Furthermore, we all knew that we learn more from listening rather than talking.
You see, when you choose to admit your weaknesses, the way to improve yourself will be wide open. Many people would like to see you succeed but the problem is, we are the biggest enemy to ourselves by limiting our potential through our ignorance in building a good attitude in the first place.
In the end, if you can prove to be successful by doing it your way, great! But the fact is, there are more pretenders than the real contenders out there who are really good at this. You know who you are.
