Trading is not all that complicated once you learn a simple, rules-based strategy for anticipating market moves.
It can be extremely lucrative but it can also be very frustrating when you start trading with a forex prop firm if you start out on the wrong foot. We’ve identified the 8 major pitfalls that you should avoid if you want to have a successful trading career with one of the best proprietary trading firms.
1. Training by companies or people with ‘no real market’ experience.
The financial markets are littered with educational companies posing as ‘experienced’ traders and promising huge returns. They prey on your emotions and are more interested in getting money out of you instead of teaching you to trade successfully. So the first thing you should do is request a copy of their career history. If there is no investment bank trading experience then head for the hills. All you’ll be getting is 3rd to 4th hand experience and you could probably find that for free on the internet.
2. Start trading with NO CAPITAL MANAGEMENT system.
You jump in before you’re ready, and your “learning experiences” burn through your capital. (As you probably know, if you blow more than 30-35% of your cash, it’s almost impossible to recover.) This is the most important aspect of any trading system. It ensures limited drawdowns and exponential growth. You get this wrong and it’s over before it even starts!
3. Trading without understanding the market you start trading in.
The Forex market is all about fundamental analysis which provides currency direction. Unfortunately, it’s the area that most new traders have no idea about and this stems once again from their education. Because most ‘training firms’ have no real experience they can’t instruct you on how to analyze and trade the fundamentals. So instead they tell you to avoid the fundamentals. If you don’t know how to interpret and analyze the fundamental economic data then you’re simply gambling and your trading career with any trading firm will be short lived!
4. Complicating your charts by overloading them with Indicators.
Have you ever felt like your trading ‘against’ the market? Because new traders don’t understand the fundamentals they have no idea where currency direction comes from. So the only alternative is to load ‘indicators’ onto your charts in the hope they can provide entry points and signal whether you should buy or sell. This is the biggest widespread problem for new traders. These indicators are notorious for being inconsistent and this stems from the fact they have a 3-4 hour time lag behind the market and they are not dynamic enough to react to the economic news. Invariably what happens is, you sell when the real market is buying and vice versa. So by loading ‘indicators’ all over your charts, you’re simply going to be second-guessing every move and this will not only be stressful but also be debilitating for your trading account.
5. Start trading with NO TRADE PLAN.
Every trade you enter has a purpose – to make money! This requires very specific planning.
You need to:
1. Identify your ‘low-risk/high probability’ entry level.
2. Make sure you have a stop loss and take profit attached and that they fit your risk-reward ratio.
3. Ensure your trade size is aligned with your capital management system.
If you trade with no plan then you’ll be more or less trading on emotions and with no stop loss. Sure you’ll still have a few winners but overall your traders prop account will not grow and it will be a slow frustrating losing experience.
6. Learning to trade via ‘Google’ on the internet.
This is a classic case of you get what you pay for. Sure it’s free and it saves you a buck but the results match the cost. There is so much misinformed information on the internet it’s amazing anyone uses it but the fact is they do.
7. Using ‘Auto Trade Robots’ to do all your trading.
They guarantee 10% returns every day yet when you use them on your own account all they seem to do is lose you money. This biggest concern about using auto trade robots is the fact they are engineered by backtesting previous market conditions. They are static mathematical systems that do not take into consideration the dynamic economic shifts in the market. So the slightest change in economic, geopolitical or market conditions these robots are worthless and will burn through your forex trading funding.
8. You don’t know how to manage positions correctly.
Taking profit too early or letting losing trades run too far is the pitfall of many rookie traders. Are you ready to jump in and start trading?
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