Forex Mistake #12 – Not Too Fast There! Rushing to Trade

Why Starting to Trade Too Fast could get you Broke?

The Japanese have a proverb which is roughly translated: Sit on a rock for three years if you want it to get warm. The meaning is more or less: perseverance will get you to your goal and you shouldn’t expect it to be achieved immediately. If you rush things, you might have brief success but in the long run, you’ll fail if you cut corners and constantly look for shortcuts. In other words, if you want something done right, take your time. I wish someone had told me this before starting my Forex experience because somehow, whenever money is involved I become too eager and hasty. Yes, it’s a mistake but I made it and I can’t turn back time; all I can do is hope you learn from it.

 

If It Ain’t Fast Enough, It Ain’t Good Enough – Wrong

I remember a sales representative calling me and talking about how easy it is to make money trading Forex… yea, you can use leverage, you can use a stop loss to limit your risk, you look for trends and you make money. Oh, OK, sounds like a piece of cake, I’ll jump right in! I opened a Demo account and I traded on it for about a week, without any knowledge of money management, risk-to-reward ratios, position sizing and S/R levels… never heard of them. But what do you know: I was making money. Virtual money, that’s true, but I figured “This is easy so there’s nothing preventing me from trading the same with real money”. Yeah, let’s get rich! Next step was to open a Live account – real money, real emotions and… real loss. My account was empty by the end of the day. Remember when I told you I had no idea about position sizing? Well, my Demo account was $50.000 and I was trading 0.10 lots (just because that was the default position size) but my Live account was a measly 100 bucks and you know what my position size was? You guessed it: the default 0.10 lots. Clearly I didn’t have any idea about how things work, foolishly believing it’s easier than others say. Pfff, why bother with educating myself? I was too busy trying to get rich quick. If it ain’t fast enough, it ain’t good enough… It was like trying to fight like a black belt without any prior training and I paid the price – literally. It took more than just that 100 bucks account to learn my lesson and to realize that I have to take a step back, reassess my position regarding trading and to understand that I need more than just an “I can do this” attitude. I needed knowledge and time for it to sink in. I needed to sit three years on that rock… and although I know some of you are just like me when I started, and that you will not follow my advice, allow me to offer it nonetheless:

 

Tips and Steps

  • Do not start by looking for a broker. The first step is learning the basics of trading. There’s no point in spending your time searching for a broker at this stage because you are NOT going to open an account yet. Learn first, trade later.
  • Go through the entire School section over at babypips.com. To this day, I still consider it the best available resource to learn Forex.
  • Trade on a Demo account (doesn’t really matter which broker you are going to use) and double your account.
  • Repeat the above 4 more times
  • For the entire time you are going to trade on Demo, you have to use the SAME amount you are going to invest on your real account. Nothing more, nothing less!
  • Treat your Demo account as if it were a Real account. You won’t be able to do this 100%, but at least try your best.
  • Start looking for a good broker to open a Real account. We can help with this part as you’ll find a ton of broker reviews on forexiswhyimbroke.com
  • Invest what you can afford to lose and start trading real money but using the LOWEST position size available with your broker. This step will ease you into trading real money.
  • Once you feel comfortable and you have a solid, reliable strategy (probably the same one you used to double your Demo account 5 times), move on to your normal position size. By now you should know what your “normal position size” is.
  • Start making money

 

Bottom Line – The Tortoise or the Hare?

I am sure you know the story of the tortoise and the hare and my advice to you is to be the tortoise. Although apparently it had a speed disadvantage, it won the race. And I can tell you firsthand that being the hare won’t get you faster where you want to be… believe me, I tried. So save yourself the trouble and go steady; lay the foundation and then build the house; learn to swim in shallow water before jumping in the ocean… OK, I’m running out of metaphors now, but I’m sure you get my point 😉

 

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