Lessons for New Traders

Here are just a few new lessons for new traders should learn if trading forex, futures, or binary options that you may find useful.

Lessons for New Traders

  • You will make mistakes.  This trade is a great example.  I entered the AUDUSD with 1 contract to the short side because price was at an ATR.  I didn’t notice that the chart was set to 5 minutes instead of my normal 15 minute.  I didn’t notice I was trading into an area of resistance on the 30 minute either.  The risk on the trade was $26.50 and I took a full loss.

Lessons for new traders - AUDUSD 5 minute

The 15 and 30 minute combo indicated a downward move — but I was on the 5 minute chart (I had changed it on Friday for a webinar and forgot to change it back).  Also notice that the Stochastics on the 15 minute was overbought (yet another indication of a downward move).

AUDUSD 15 and 30

If I had looked at my multiple timeframe ATRs, it would have prevented the trade because it clearly indicated that price was at an area of resistance.  Evidently I needed more coffee.

AUDUSD 15 minute

  • Lessons for New Traders – Make the numbers work for you.  In this case, the GBPUSD was showing a downward move was immient.  I entered short with a risk of $26.25 using the correct timeframes.  Price was on the way down on the 30 minute (to test for support) and the 15-minute timeframe had formed a reversal bar confirming the move with the Stochastics in a state of being overbought.

GBPUSD 15 and 30

Additionally, the 15 minute chart with the multiple timeframes confirmed what I was seeing on the 15 and 30 and also reaffirmed my direction because price was also heading down to test for support on the 60 minute chart.

GBPUSD 15 ATR

I set a profit target at $15.  The profit target was filled on the GBPUSD.

My win/loss ratio was 50% but I still made a profit.  Why?  Because I make the numbers work for me.

  • Risk $26.50 on AUDUSD – full loss
  • Risk $26.25 on GBPUSD and profit target filled at $85
  • Profit after loss:  $32.25 per contract

The risk to reward was for every $1 of risk I made $2.24 — which means I don’t have to be the world’s greatest trade.  I only have to make the numbers work for me.

  • Take responsibility for your mistakes.  In this case, I could have blamed the market, indicators, or the binaries but it was my fault.  I did not perform adequately.  I jumped in without reviewing all my timeframes and even forgot to reset my chart to 15-minutes.   I also opted to take a full loss on the AUDUSD because it’s painful and I am not partial to pain.  However, I need to suffer the pain to remind myself to pay attention and follow my rules.  In this example, I would have made $58.75 per contract but I wasn’t paying attention so it cost me.  Knowing I created my own loss reminds me that I have rules for a reason and I need to follow them.

These are just a few lessons for new traders that will help overcome some of the losses and obstacles that traders will face on a daily basis.

About Gail Mercer

Gail Mercer, Founder of TradersHelpDesk, is a highly respected trader, trainer, author, and speaker residing in North Carolina. She has over 15 years of experience in trading and in the development of custom indicators.

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