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.
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).
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.
- 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.
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.
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.