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Top 10 Ways New Traders Lose Money

If you frequent trading oriented websites you’ll probably have notice ads from the forex broker Oanda. Those familiar with Oanda know this is something very new. Unlike most retail forex brokers, they have never been big marketers, preferring instead to allow word-of-mouth to grow their customer base. It worked pretty well, as they are right there among the biggest global retail forex brokers.

A short while ago, however, Oanda finally started a real advertising campaign. The most prominent of those ads features a “Top 10 Ways New Forex Traders Lose Money” theme. Most of their top 10 are fairly universal, so I present them here for discussion.

1.  Lack of Experience
2.  Unreasonable Expectations
3.  Absence of a Sound Trading Plan
4.  Lack of Discipline
5.  Failure to Include Stop-Loss and Take-Profit Instructions
6.  Excessive Leverage
7.  Holding Too Many Open Trades
8.  Holding Losing Positions Too Long
9.  Ignoring Rate Spread Fluctuations and the Impact Spreads Have on Profitability
10. Thinking About the “Big Win” More Than Effective Cash Management (AKA Greed)

I think #2 and #10 are at least very closely related, #6 and #7 both fall under the “trading too big” theme, and it seems to me that #5 really is part of #3, so we could probably cut this list down via consolidation. Beyond that, most of the ideas broached are common ones, and in some cases link closely to my 8 Ways to Limit Your Trading Education Tuition. The spread fluctuation discussion in #9 is certainly an interesting addition to the topic, though.

3 replies on “Top 10 Ways New Traders Lose Money”

John,

I find these lists to be helpful and informative. They are truly useful – but only when the person reading them accepts the fact that they apply to him/her.

Thus, the biggest problem with these lists is the single item that is never mentioned, and it should be number 1 for traders.

1. The following list of trader mistakes applies to me. I am not exempt. I am not special. I must avoid as many of these mistakes as possible.

I like that idea. Think I’ll post on that one of these days.

Regards

Great list. You really can’t blame new traders for the #2 mistake. There’s just so much hype out there created by marketers of forex systems and trading robots.

They push the false idea that forex trading is a sure way to “get rich quick”.

As a result, many new traders come to the forex arena with grand expectations, hoping to turn $500 into $50,000 in only 6 months. Hence, they make mistake #2.

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