- Moving your stop
We all have been there…
You are taking some heat in a trade and price approaching your stop loss at an alarming rate. A little voice on your head is telling you that price is just going to take out your stop to reverse and go to your full profit target.
So you move your stop
Price continues in the same direction and you take a much bigger loss than if you left your stop at the original price level.
- Too big a position size
This trading mistake can be fatal to your trading career.
You should never risk more than 2% of your trading capital on any one trade. This is a mistake that many new traders are prone to and it can lead to a very short trading career.
Trader Joe funds his trading account with $5000 and is looking forward to doubling his account each month with his new forex trading robot.
His position size on his first GBP/USD trade is 1 standard lot or 10 mini –lots
The trade does not work out and he loses 30 pips – $300.
The next trade is also negative and says he loses 25 pips – $250
If you do the math that is a 10% loss of his trading capital in one day.
Three losing days like this and he is almost wiped out, not to mention the psychological impact to his confidence level this will have.
- No reasons for a trade
You should always have a reason why you are entering a trade. The more reasons you have the better.
Personally I only trade when I have a minimum of 3 confirming factors for a trade.
At no stage should you chase the market, because as we all know the moment you enter price will reverse on you.
- Trading during news
These days I see a lot of trading gurus advertising “news trades”
Well – good for them.
I prefer to stand aside during news. Price can spike hundreds of pips in any direction during news and your stop will be taken out in a flash. Trust me-it has happened to me.
It is impossible to predict price movement during news, and the practice that I adhere to and would advise you to do as well, is to stand aside 5 minutes before and after major news announcements.