Are You Making Any of these 7 Very Common Forex Trading Mistakes? | Part 2

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Forex Trading Mistakes

IMPORTANT QUESTION:

Have you read Part One yet? This article continues straight on from there – if you’ve not read it then you can quickly jump over to:

Are You Making Any of these 7 Very Common Forex Trading Mistakes? | Part 1

 

5: Space for reversal trigger setups to move into (higher profits, better risk rewards, lower risk)

Following on from the previous Point 4 found in Part 1, discussing hunting reversal trade setups at the correct swing highs or swing lows is something we refer to as “Space”.

This is something we normally talk about a lot more in the members’ area than in the public site, but it is something that is absolutely crucial to successful trading and to making high probability trade setups.

So, what is space? And what is traffic?

When discussing the previous point I added a chart to illustrate for you the wrong spot to look for a pin bar and the wrong swing point. I am going to add this exact same chart once again below:

As we discussed in Point 4, we need to take reversals when they are stick out and in this ‘Bearish” pin bar example it should be at a swing high.

Just like you see on the chart above, the huge problem that we nearly always get when we don’t trade using this rule is that our trades have no “space” to move into.

Space is crucial to high probability trade setups. To explain space it is easier to explain the opposite of what space is and that’s “Traffic”.

Traffic gets its name because when you are stuck in a traffic jam, you are not going anywhere fast and you are going to struggle to make any moves.

Check out the chart below. You can go to literally any Forex chart and find periods of traffic, but here is a way to explain exactly what I am saying. If you are on the freeway and there is a lot of space to move, you are going to be able to move easily, freely and most importantly, directly to where you want to go without stopping.

If, however, there are a lot of cars and roadblocks (support/resistance areas) in the way like in the image below, instead of just putting your foot down and going directly to where you want to go, all of a sudden you have to speed up, slow down, speed up, pause, speed up, pause, just like they are doing below to get through to the other side. Make sense?

 

 

That is the same with price action. Traffic is built from support and resistance levels and the more levels and the closer together, the more traffic and harder for price to make a move.

On the flip side we have space. The more space, the easier price can move. The more freedom price has to move, the better chance it has of making a move into that area because it does not have to break levels or be in a constant tug of war.

This is something you need to constantly be thinking about with your price action story and be putting into the mix as you plan you pre-trade price action plan.

 

6: Money management / position sizing

Out of the 7 mistakes it is this one that I am surprised time and again that traders either have not heard about, or do not know how to do properly.

Whilst over-trading is what is killing traders’ accounts, this is not far behind and is often done in only one or two trades with the trader not even realising it!

Often they will make a trade for a set dollar amount (for example, the trade size will be $50,000) and that goes fine. But when they make the same amount trade for $50,000 on another market or pair the next day they don’t realise that everything is completely different.

Here they are risking a completely different amount in real dollar terms, and risking a completely different percentage amount of their account, EVEN THOUGH they are making the same $50,000 trade in both trades. They will quickly realise something needs to be changed because either they will be winning or losing WAY too much.

That is what money management and position sizing is all about and why we use it. It helps us do two major things:

  1. Know exactly how much of our accounts in money and percentage terms we are risking each trade and
  2. Ensure we are not betting the farm on any one trade so that we can live to trade another day

I have a really in-depth lesson that goes right into this topic because money management involves quite a lot of different methods. I really suggest you grab a cuppa after this lesson and check out:

What Money Management Method Suits You Best?

 

7: When first starting you are expecting big “LIVE” results ➜ but, then you get very little education and hardly any demo/practice time.

In Part One I talked about the reason why most traders come to trading and trying to really make clear the goal as to why you came to trading in the first place.

My first contact with a lot of traders is when they send in an email asking for help or they have started looking around the internet for more education and help to improve their trading.

Often it takes until traders start losing before they will get to this stage – a lot of traders even have to completely blow their trading accounts. This is normal. When traders come to trading they are normally are coming for reasons such as:

1: More money

2: More time for themselves like holidays, hobbies

3: More family commitment / time with kids (or some combination of the three)

 

Traders are not normally coming to spend as many hours as they possibly can scouring the internet studying and learning!

So if they can learn the basics, start making buckets of money and retire to the Maldives, then it’s happy days.

And to be honest, every second Forex and Binaries site you read tells you how you can make twenty trillion dollars with overnight learning and a $50 investment! I mean that sounds pretty good to me as well and realistic to boot! ? That’s the emoji of the monkey with his hands over his eyes.

Have you ever noticed that a lot of the sayings your Grandma gave you ring true today probably even more so in our day an age? And probably getting truer by the day.

You know all the types of sayings and ‘truisms’ I am talking about. Things like oh “You are what you eat” or my Grandpa would then jump out with something like “It is very troubling to me that doctors have a practice.”

The one thing we hear time and again online, in the mainstream news, we even see it in the first few pages of major new publications is the saying:

If it sounds too good to be true, then it probably is.

I have been emailed twice this week alone from people who thought they could trade a 100% sure thing strategy or looking to buy an indicator that never takes a loss. It comes down to you, your commitment and where you want to go with your trading.

Now, that you know better, it is up to you to spend the time and effort both on your education and investment in the charts.

The two biggest tips I can give you here are:

  • Get a FREE DEMO of Forex Tester 3, which is BRAND NEW and has replaced the Forex Tester 2. This is like a Forex golf driving range, where you can do a year’s worth of trading in a couple of hours.

 

  • Learn to create a high probability edge over the market and also think with an edge, rather than just one setup at a time. Start thinking as part of probabilities.

 

Your Part Two Empire Napkin Trading Lesson BONUS!

I have created a super in-depth lesson bonus that I know you are going to get a heap out of. A lot of people come to trading with massive amounts of ability and huge goals, but quickly lose focus.

I have created a “Napkin Empire Trading Blueprint” for you to clearly define your path and how it is you are going to get to where you want to go as well as the exact strategies you are going to use. Just click the link below to access your free copy of your bonus:

 

 

Safe trading and all the success,

Johnathon

 

We have come to the end of the two part lesson and your feedback was awesome in Part 1. I really would love to know the answer to just one question: What has been the ONE big thing, that one major struggle, fear, or strategy that has held you back in your trading thus far?

Are You Making Any of these 7 Very Common Forex Trading Mistakes? | Part 2 was last modified: March 22nd, 2017 by Johnathon Fox
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About Johnathon Fox

Johnathon Fox is a professional Forex and Futures trader who also acts as a mentor and coach to thousands of aspiring traders from countries right around the world. Johnathon specialises in helping traders reach their full trading potential by helping them master the art of price action trading and correct money management techniques. To learn more about how you can become a student of Johnathon’s and learn the strategies he uses, then check out the Forex School Online Lifetime Membership