Mistakes Others Make Could be very Useful in Forex Trading

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In this article, I’d like to outline some of the mistakes that forex or stock traders make, to help you learn from these mistakes, and not to repeat the same mistakes. I think you remember that in one of my recent posts, I mentioned that “The wise learns from the others’ mistakes. The fool learns from his own if he learns at all.”

This is very true in forex trading. If you want to learn from your own mistakes, it can cost you a lot of time and money. But if you learn from those who have already made all the possible mistakes that a forex trader can make, it will save you a lot of time and money. It will shorten your learning journey and you will become a profitable forex trader sooner.

There are two kinds of mistakes that novice traders make. One is the mental and psychological mistakes, and the other one is the technical mistakes.

Mental and Psychological Mistakes:

1. Forex is a get-rich-quick scheme:

This is what many novice traders think. Forex makes money while you don’t need to promote any products or services, make any phone calls, sell anything to the customers and… . This is true, but it doesn’t mean that forex is a get-rich-quick scheme. It can potentially make a lot of money, but you will lose a lot of money if you deal with forex as a get-rich-quick scheme.

2. More trades, more money:

Forex is not like the other businesses that when you make more sales, you make more money. In forex, you have to wait for the market to give you a trade setup, whereas with the other businesses you have to spend more time, money and energy to make more sales to make more money. In forex trading, you have to be patient enough to wait for the trade setups. In the other businesses, you have to work more to make more money.

In forex trading, you have to wait for the market to give you an opportunity. In other businesses, it is you who has to create the opportunities.

3. I can make money through forex trading while I have no income and I need to pay my bills.

You will not make any money through trading if you “have to” make money. I mean you can not make any money through trading when you are already in trouble paying your bills. To become able to make money through trading, you have to have an income that covers your expenses, and so you can focus on learning with peace of mind. If you push yourself to make money through trading, you are hammering to lose your money. When you are in need, you lose your patience and you click on the buy/sell buttons while there is no trade setup.

Forex or stock trading is like hunting. You can not take your rifle and shoot aimlessly to hunt something by chance. You only waste your bullets. You have to look for the prey sometimes for several days. Sometimes you have to walk in the woods or mountains for weeks, or you have to sit in your ambush for days until you can hunt something.

It is the same with trading. You have to wait for a trade setup to form. If you just take a position while there is no setup on the chart, you lose.

When you “have to” make money to pay your bills, you push yourself to take positions while there are no trade setups, because you have to pay your bills on time.

Please read this article very carefully.

4. I am a great teacher, doctor, engineer, mathematician, scientists, …, AND SO I can make money through trading definitely.

Absolutely wrong analogy!

I have seen so many highly educated people who have done nothing but losing money in trading, and also so many non-educated people who succeeded to make money consistently.

The truth is that trading has nothing to do with education. You can make money through trading without any academic education, and with having a normal IQ. The only thing you need is learning some rules and then disciplined to follow those rules. If you do this properly and precisely, you can make money through trading. If not, you lose, no matter how educated you are.

Even many educated people are not disciplined enough to wait for the trade setups. Many of them are so proud of their education, and so they underestimate the forex market and think that the market has to follow what they say and predict. This is wrong. Markets don’t follow anybody. We have to follow the markets.

5. I have to invent and develop my own trading system.

Again, this is the problem of many educated people. They think they are smarter than following the others’ trading systems, and they have to develop their own. They spend a lot of time and money to do it, and will finally give up. There are simple and easy to use, yet strong and effective trading systems that anybody can use to make money. Why should we try to develop a unique trading system?

I have seen so many traders who have been working on their own system for years without any result. They develop a new system every week and modify it every day until the next week that they develop another new system. We are here to trade and make money, not to invent something. Do you agree?

6. The more I learn, the better I will trade, and the more money I will make.

This can be true about the other businesses, but not with forex trading. It is good to learn more, but you should know how to use this knowledge to strengthen your trading system. In many cases, the new things you learn deviate you from the right track and make you try new things that had not been tried before. Learning new things doesn’t mean winning in trading.

Of Course, an experience is good and valuable, and you will become more experienced every day, and so you will make fewer mistakes and your success rate will go up. But learning and trying things can cost you time and money. To make money through forex trading, you don’t have to keep on learning all the time. Just learn the trading basics, and then a trading system, and then master your trading system.

Please read this article very carefully. I have explained about the things you have to learn to start making money.

Technical Mistakes:

1. Trading using the indicators like moving averages.

The only moving average that the markets show reasonable reactions to it, is the Bollinger Middle Band which is a 20 simple moving average. The other moving averages are money suckers. Things you hear like “have a 40 or 100 or 200 or … MA on the chart, and go only long when the price is above it, and only short when the price is below it, is the most stupid thing some so-called trading gurus say.

Many of the indicators like Stochastic are money suckers too.

2. More indicators, more confirmation, and so a stronger and more reliable trade setup.

Candlesticks are the best and most real-time indicators that reflect the markets sentiment directly and without any manipulation. They will be stronger when Bollinger Bands are added to them. If you like to have more confirmation, you can use MACD. You don’t need anything else if you want to make money. If you want to lose, then add more indicators to the chart and make it too complicated.

3. Short time frames generate more trade setups, and so I can make more money.

Short time frames can generate more trade setups, but how profitable those trade setups are? How many hours do you have to sit at the computer waiting for the short time frames to generate the trade setups you want? How strong and reliable are those trade setups?

Daily Market Lookup - 23rd August, 2016.

              Daily Market Lookup

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• Asia shares inched up on Tuesday while oil fell for a second session as investors awaited clues on whether the Federal Reserve will raise U.S. interest rates this year. A survey of Japanese manufacturing activity showed signs of steadying in August as output rose for the first time in six months, but the improvement was marginal and had little impact on stocks. The IHS Markit/Nikkei Japan Flash PMI rose to 49.6 in August from a final 49.3 in July. More flash surveys are due from Europe and the United States later in the day. The whole world seems to have hushed ahead of comments from Fed Chair Janet Yellen at the central bank's annual meeting in Jackson Hole on Friday. Investors still doubt the stars will align for a hike anytime soon, so a hawkish tone from Yellen would challenge that equanimity. Prices retreated from two-month highs on worries about burgeoning Chinese fuel exports, more Iraqi and Nigerian crude shipments and a rising U.S. oil rig count. The New Zealand dollar blipped higher after the country's central bank forecast another 35 basis points in possible rate cuts, less than many investors had wagered on.
• The dollar dipped against the yen on Tuesday, while the New Zealand dollar rose after the nation's central bank chief said he did not see the need for a rapid succession of interest rate cuts. The kiwi was up 0.6 percent at $0.7308 NZD=D4 after Reserve Bank of New Zealand Governor Graeme Wheeler said the current interest rate track involves further monetary easing but did not see the need for a rapid series of rate cuts. The RBNZ in early August cut interest rates by 25 basis points to a record low of 2.0 percent and said further policy easing may be needed The kiwi nevertheless rose to a 15-month high of $0.7351 mid-month, as it has proved resilient to falling cash rates at home given they remain far higher relative to those of other developed economies. The market's focus was on whether she would express hawkish views similar to those of Vice Chair Fischer and New York Fed President William Dudley, or take a more subdued stance in line with the July Fed policy meeting minutes that suggested the central bank was not in a hurry to raise rates. Over the immediate horizon, the market is looking for catalysts from the euro zone and U.S. purchasing managers index (PMI) data and U.S. home sales numbers due later in the session.
• U.S. Federal Reserve has two guiding goals when designing monetary policy: maximum employment and stable inflation. But as the country's central bankers converge for their annual symposium in Jackson Hole, Wyoming this week, they are under increasing pressure to reform their own system and goals to better reflect the diversity of America and its incomes. At this year's flagship economic policy conference, from Aug. 25 to 27, U.S policymakers will confer not only with their counterparts from around the world but also host a meeting on Thursday with a group calling for a radical overhaul of the Fed. Fed Up, a network of community organizations and labor unions that wants a more diverse, transparent and income-inequality aware central bank, will meet with Kansas City Fed President Esther George. It may be one reason why the organizers changed the dress code for the evening, usually a suited and booted affair, to casual attire. So far three other Fed policymakers, New York's William Dudley, Cleveland's Loretta Mester and Boston's Eric Rosengren, are also scheduled to show up. A Fed spokesman said Federal Reserve Governor Lael Brainard from the Washington-based Board of Governors also plans to attend the meeting. The activists will look to build on their proposals, put forward in conjunction with former top Fed policy adviser Andrew Levin, to make the Fed's 12 regional banks government entities. The Fed is the world's only major central bank that is not fully public. Oil prices fell over 1 percent on Tuesday, with Goldman Sachs warning that August's price rally had been overdone and that a proposed oil production freeze at current near-record levels would not help rein in an oversupplied market. Analysts said the falls were a result of an overdone price rally this month which lifted crude by over 20 percent between the beginning of the month and late last week. "While oil prices have rebounded sharply since Aug. 1, we believe this move has not been driven by incrementally better oil fundamentals, but instead by headlines around a potential output freeze as well as a sharp weakening of the dollar (and exacerbated by a sharp reversal in net speculative positions)," Goldman Sachs said. The bank said a proposal by members of the Organization of the Petroleum Exporting Countries (OPEC) and other producers like Russia to freeze output at current levels "would leave production at record highs" and therefore do little to bring supply and demand back into balance. Goldman also said the likelihood of a deal "may not be high" due to disputes between OPEC members Saudi Arabia and Iran as well as uncertainty over non-OPEC producing giant Russia's willingness to cooperate.

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