Learning to master Forex day trading online for someone who has no background in the financial markets can be intimidating. Generally, much patience and time are needed.
However, by looking at the most common mistakes we can at least shorten the learning curve and get past the first few hurdles as quickly and painlessly as possible. The financial rewards once the skills are learned are certainly worth it!
Mistake #1
Thinking they can generate huge amounts of money in a short time. This is not a get-rich-quick scheme. An individual approaching day trading online with that mindset best look somewhere else.
Mistake #2
Going by gut feeling instead of calmly assessing market conditions using technical indicators and selecting high probability trades.
Mistake #3
Chasing the market.
A typical scenario: The new trader feels certain price is going up so puts in a long position. Unexpectedly price pulls back. The new trader gets nervous and doesn't want to lose too heavily so comes out with a 15 pip loss.
Shortly after that price resumes the uptrend. The new trader thinks, "I was right in the first place" and puts in a second long position to try and make up for the 15 pip loss and make a profit on top.
Low and behold, price doesn't go where the new trader was expecting, pulls back, and takes out the position at a 25 pip loss. Score for the day: -40 pips.
Chasing the market is one of the surest ways to blow your account.
Mistake #4
Lack of thorough preparation before the start of a new trading session.
It is crucial a trader examines the charts from a higher time frame down to a small time frame (e.g. weekly, daily, 4 hour, 1 hour) to pick up significant candle or chart patterns and understand the direction of the overall trend.
Additionally, consulting the daily calendar for Fundamental Announcements will ensure the trader is not caught off-guard by sudden market moves at news time.
Mistake #5
Poor or non-existent equity management.
New traders often fail to educate themselves on how much they can risk on any one trade according to how much capital they have in their account. Many are tempted to trade multiple lots far too early only to get wiped out.
Multiple lots can result in big profits. They can also eat you alive when a trade goes against you. Only strict, almost paranoid, tight equity management will ensure the account survives and grows.
Mistake #6
Floating from one system to the next, trying indicator after indicator, becoming a 'jack of all trades, but master of none.'
Find a proven system that fits with your trading personality and style and stick with it until you make it work for you.
Mistake #7
Thinking they can learn by themselves, find the secret code and 'crack the system.'
Most successful traders learned from someone who is already a professional successful trader, preferably with years of experience. It is so important to have a mentor or tutoring program to get up to speed more quickly.
Conclusion
Browsing the seven major mistakes above reveals an interesting fact about mastering Forex day trading online. Most of the problems do not revolve around the right strategy! Obviously, a sound, tried and tested strategy is crucial. However, once a strategy has been learned, the main problems revolve around mental and emotional discipline.
The newer trader does well to recognize this fact. Once the new trader is up to speed on the trading mechanics, order execution, and charting software, most of the time and energy needs to be spent on learning mental and emotional control through experience.
Constantly monitoring one's thoughts and feelings during a trading session can help with this. Mental rehearsals can also be very powerful. (See resource box for lessons from Mohammed Ali)
Forex day trading online will only be successful once the trader is able to identify their own personal mistakes and then do everything possible to control and avoid them. The checklist above can help toward that end.