I have blogged about my Forex trading journeys in the past, and there was a reason I have stopped blogging about it for a while now, and that reason is that I had blown out my account.
What does that mean? It means I lost a €2,000 account and if that doesn’t shock you already; I lost it in about five hours!.
Cool. Want to hear more?
I had just put in another €2,000 three weeks ago, so here I am back again trading forex.
Am I crazy for doing so?
Probably, I hear it all the time from my girlfriend and parents so it must be true but what’s also true is that I had spent the last 4 months since I lost my account religiously following up on training.
I’ve found new training, new mentors and new strategies and have put these new systems through a fake “demo” account where I treated it like a real account (not too much risk) and was profitable for all the 4 months up till today.
I did promise myself that I was going to wait till I do six months of being profitable on a demo before I go at it once again, but I just couldn’t wait that long ; I had to go back into the markets!
Now, so far you know that I have blown away €2,000 and here I am trying to give you advice.
Yes; that is exactly what I am trying to do, and I’m only qualified to give you these following few pieces of advice because I have done my fair share of forex trading mistakes that I would like you to learn from.
I will not teach you how to make money on FOREX today. Hopefully, that comes in the future, but I do want to give you some tips and pointers on how not to lose your account.
Again; this is not a guide on how to make money with FOREX. If you’re interested in that; please check out the AstroFX YouTube channel who are a duo who make a great living out of trading forex and teaching others how to do the same.
This is a guide on how to avoid making beginner-style forex trading mistakes that will (quite literally) help you not to lose your account along with every penny you have overnight.
Let’s get started;
My 5 Forex Trading Mistakes
Over Reaching Your Limits
The ideal amount you risk with every single trade you open is 0.5%. So, if like me you have a €2,000 account, then ideally; you make sure you do not lose more than €10 per trade you do.
Because losing €10 from a €2,000 account (while still not fun) will not drop your funds and you’d still have another €1,990 to “play with” if I may use that term.
I have made the mistake of opening a trade with a big lot size and immediately being down €80 from just opening a trade; that is not cool, and it will lead you to you losing your account in no time.
Sure you may make some quick profits if things go your way, but just getting into the habit of risking big for a quick payout is one of the worst strategy to use as a newbie forex trader.
Not Setting “Stop Losses”
I wasn’t a fan of this much starting out, that is because I had the idea that a losing trade just might turn around.
I’ve also had a few experiences where I did set a stop loss, got stopped out and then the trend reversed (it sucks I know) but, that still does not mean you should not set a stop loss and I have two very recent examples of when this came in handy.
When the GBPUSD shot up this year when the UK election was announced:
and when the Gold shot through to a 3-month high:
If I hadn’t had set a stop loss with these two trades, I would have blown out my €2,000 account I just created.
That would’ve been the second time I lost €2,000 in one day and probably the last I would’ve ever touched Forex again.
As a beginner trading FOREX, you are going to make mistakes, and things are still going to go not according to plan; it happens to the best FOREX traders in the world as well so trust me when I say; you need to set up your stop losses.
Going Into The Charts Blind
When you install a trading platform such as MetaTrader, you can see that there are many indicators and tools you can use to predict the market better.
As a newbie forex trader, I was just buying into positions without ever doing any research; which is a huge mistake.
There’s a lot to be learned yes, and probably you do not need to know about every tool and indicator that exists, but you need to pick a few and base your strategies on that.
I for one, and I have not yet explored and fully understood all the tools, have been using the Fibonacci lines, the trend lines and the support and resistance lines to guide me into buying into positions.
While some others may use different methods to predict the direction of the market, I have found that having these 3 “tools” on my chart helps me trade better, thus making more money.
Am I missing out on something that I have not yet used yet? Probably yes; but it is much better than going into positions blind and without any direction or indicator.
Starting On A Big Demo Account
A good piece of advice you often find when you start learning Forex (apart from setting a stop loss), is the idea of learning on a free demo account.
This is obviously is so that you can learn by making mistakes on a fake account with fake digital currencies and while I did start off with a demo, I skipped the “learning the lesson” part – and I paid for mistake well.
One thing that I would also suggest to every newbie trader is to start with a small demo account.
The least you can go on for a demo account using MetaTrader 4 is €3,000 so unless you plan on putting more than that when you first start out with real money, stick to that.
Do not start a €100,000 demo account, that is unless you plan on putting in €100K when you decide to go real.
This is because you will see huge profits from a €100,000 account. A “good trade” can instantly earn you thousands and give you a high like no other making you imagine what you will be doing that with a real account.
The final forex trading mistake that I did and want to talk about is; to treat your demo account as if it were real.
Not Realising The Difference Between Real & Demo
One thing that I have found makes a huge mental shift happen for me is the act of going from demo to live.
Once that little yellow “REAL” sticker pops up, you realise shit just got real. Yes, you are now dealing with a real account with real money in it so you better not fuck it up.
This thinking can be stressful yes, and I do not think there is anything out there that will prepare you for that mental shift without actually doing it.
Going live with a real account is scary, and you may find yourself opening and closing trades way differently than when you used a demo account since there were no repercussions with a demo.
Again; this also relates back to setting up stop losses and using a great forex strategy to minimise your risk with real money.
You will never feel what it’s like trading with real money unless you trade with real money but try to keep to the demo account as if it were real and don’t be afraid to try things and make mistakes – a demo is just for that.
It won’t quite be the same, but it would help you cope with the anxiety that comes when you decided to open a real, breathing trading account.
Sorry to end this post on such an anxiety-boosting note but please note that FOREX is a dangerous business that requires you to make some difficult decisions and have a firm mental grasp on things.
Again; please feel free to dismiss my advice as I am in no way a FOREX expert, but I am a beginner just like you who unfortunately lost multiple thousands of euros trying to chase a dream.
One thing I’d like to add which just hit me as I am typing it is to not make FOREX your main source of income when starting out.
I have multiple online businesses that allows me to do these kind of experiments so even though losing money is not fun, it’s a calculated risk that I can take responsibility for.
Do not think FOREX is instantly going to make you rich as it won’t. Just like when starting an online business, there is a skill that needs to be learned and understood, but luckily, there is training you can take advantage off.
If you’re interested in getting started with FOREX, go check out AstroFX channel on YouTube and start reading and watching any training material you can find. I’d also suggest you download MetaTrader 4 on your iPhone or desktop to start getting ‘a feel” for the market.
Hope this message finds you well. I post my results from my Forex trading on my personal blog here so check in there if you’re curious to see how I am doing.