The following is a post I came across on a trading forum not too long ago (can’t recall which one at this point). It speaks to a couple of important topics new traders face all too often.
Just started a account of 2,000 us dollars . Before I did I played on the practice account and made a 50k account to 100k in 13 days. I was confident in winning if I started a real(live) account. My first day I made a 220 dollars roughly and 130 pips . Second day I lost 80 dollars . And today which is my third day isn’t going well . I need advice in what to look at and how to come to a good conclusion . What I look at is low and high of the day and news feeds then I buy according to info I gather .
How many mistakes can we come up with from this trader’s story?
Here’s a good start:
- He believed 13 days of demo results was a significant sample size upon which to base a judgement.
- His risk on his demo trading was much too high as indicated by the 100% gain in such a short period – unless he was just extraordinarily lucky, in which case, see #1.
- He may have put too much money into live trading, though I can’t say that for sure. It depends on what $2000 represents in his financial position. I’m all for getting to live trading quickly, but I’m also for doing so with as little money as you can get away with.
- The risk he took in live trading is likely too large as shown by an 11% gain his first day.
- He went into live trading without a confident plan, as indicated by his request for help with his strategy after only a couple of days of losses.
I’m sure you can come up with others, and if so, post them below in a comment.
This forum post, to my mind, is just another example of a trader who got way ahead of himself. He never took the time to really develop a plan for his trading, leaving him in that all-too-common situation of feeling the need to jump to a new idea or strategy when the current one seems to be faltering.
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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
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