Let’s Learn from the Others’ Mistakes

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Let’s Learn from the Others’ MistakesIn this article, I’d like to outline some of the mistakes that forex or stock traders make, to help you learnfrom these mistakes, and not to repeat the same mistakes. I think you remember that in one of my recentposts, I mentioned that “The wise learns from the others’ mistakes. The fool learns from his own, if helearns at all.”

This is very true in forex trading. If you want to learn from your own mistakes, it can cost you a lot of timeand money. But if you learn from those who have already made all the possible mistakes that a forex tradercan make, it will save you a lot of time and money. It will shorten your learning journey and you willbecome a profitable forex trader sooner.

There are two kinds of mistakes that novice traders make. One is the mental and psychological mistakes,and the other one is the technical mistakes.

Mental and Psychological Mistakes:

1. Forex is a get-rich-quick scheme:

This is what many novice traders think. Forex makes money while you don’t need to promote any productsor services, make any phone calls, sell anything to the customers and… . This is true, but it doesn’t meanthat forex is a get-rich-quick scheme. It can potentially make a lot of money, but you will lose a lot ofmoney if you deal with forex as a get-rich-quick scheme.

2. More trades, more money:

Forex is not like the other businesses that when you make more sales, you make more money. In forex,you have to wait for the market to give you a trade setup, whereas with the other businesses you have tospend more time, money and energy to make more sales to make more money. In forex trading, you haveto be patient enough to wait for the trade setups. In the other businesses, you have to work more to makemore money.

In forex trading you have to wait for the market to give you an opportunity. In other businesses, it is youwho has to create the opportunities.

3. I can make money through forex trading while I have no income and I need to pay my bills.

You will not make any money through trading, if you “have to” make money. I mean you can not make anymoney through trading when you are already in trouble paying your bills. To become able to make moneythrough trading, you have to have an income that covers your expenses, and so you can focus on learningwith peace of mind. If you push yourself to make money through trading, you are hammering to lose yourmoney. When you are in need, you lose your patience and you click on the buy/sell buttons while there isno trade setup.

Forex or stock trading is like hunting. You can not take your rifle and shoot aimlessly to hunt something bychance. You only waste your bullets. You have to look for the prey sometimes for several days. Sometimesyou have to walk in the woods or mountains for weeks, or you have to sit in your ambush for days, untilyou can hunt something.

It is the same with trading. You have to wait for a trade setup to form. If you just take a position whilethere is no setup on the chart, you lose.

When you “have to” make money to pay your bills, you push yourself to take positions while there is no

Let’s Learn from the Others’ Mistakes

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trade setups, because you have to pay your bills on time.

Please read this article very carefully.

4. I am a great teacher, doctor, engineer, mathematician, scientists, …, AND SO I can make moneythrough trading definitely.

Absolutely wrong analogy!

I have seen so many highly educated people who have done nothing but losing money in trading, and alsoso many non-educated people who succeeded to make money consistently.

The truth is that trading has nothing to do with education. You can make money through trading withoutany academic education, and with having a normal IQ. The only thing you need is learning some rules andthen a discipline to follow those rules. If you do this properly and precisely, you can make money throughtrading. If not, you lose, no matter how educated you are.

Even many educated people are not disciplined enough to wait for the trade setups. Many of them are soproud of their education, and so they underestimate the forex market and think that the market has tofollow what they say and predict. This is wrong. Markets don’t follow anybody. We have to follow themarkets.

5. I have to invent and develop my own trading system.

Again, this is the problem of many educated people. They think they are smarter than following the others’trading systems, and they have to develop their own. They spend a lot of time and money to do it, and willfinally give up. There are simple and easy to use, yet strong and effective trading systems that anybody canuse to make money. Why should we try to develop a unique trading system?

I have seen so many traders who have been working on their own system for years without any result.They develop a new system every week and modify it every day until the next week that they developanother new system. We are here to trade and make money, not to invent something. Do you agree?

6. The more I learn, the better I will trade, and the more money I will make.

This can be true about the other businesses, but not with forex trading. It is good to learn more, but youshould know how to use this knowledge to strengthen your trading system. In many cases, the new thingsyou learn deviate you from the right track and make you try new things that had not been tried before.Learning new things doesn’t mean winning in trading.

Of Course, experience is good and valuable, and you will become more experienced every day, and so youwill make less mistakes and your success rate will go up. But learning and trying things can cost you timeand money. To make money through forex trading, you don’t have to keep on learning all the time. Justlearn the trading basics, and then a trading system, and then master your trading system.

Please read this article very carefully. I have explained about the things you have to learn to start makingmoney.

Technical Mistakes:

1. Trading using the indicators like moving averages.

The only moving average that the markets show reasonable reactions to it, is the Bollinger Middle Bandwhich is a 20 simple moving average. The other moving averages are money suckers. Things you hear like“have a 40 or 100 or 200 or … MA on the chart, and go only long when the price is above it, and onlyshort when the price is below it, is the most stupid thing some so-called trading gurus say.

Let’s Learn from the Others’ Mistakes

http://www.fxkeys.com/lets-learn-from-the-others-mistakes/[8/9/2015 7:52:11 PM]

Many of the indicators like Stochastic are money suckers too.

2. More indicators, more confirmation, and so a stronger and more reliable trade setup.

Candlesticks are the best and most real time indicators that reflect the markets sentiment directly andwithout any manipulation. They will be stronger when Bollinger Bands are added to them. If you like tohave more confirmation, you can use MACD the way it is explained here and here. You don’t need anythingelse, if you want to make money. If you want to lose, then add more indicators to the chart and make ittoo complicated.

3. Short time frames generate more trade setups, and so I can make more money.

Short time frames can generate more trade setups, but how profitable those trade setups are? How manyhours do you have to sit at the computer waiting for the short time frames to generate the trade setupsyou want? How strong and reliable are those trade setups?

A trade setup on the 5min chart may move the price for 20 pips while you have been sitting at thecomputer waiting for it to form for several hours. A trade setup on the daily chart can move the price forhundreds of pips, while you don’t have to sit at the computer and watch the chart all the time. You justneed to check it once every day.

Most new traders think that working with the short time frames make more money, but I have never seenthis during the past 23 years. I have only seen that these traders lose more, and either they will have toswitch to the longer time frames, or they give up on trading. If you want to repeat the same mistake andwaste your valuable time, then trade the 5min and 15min charts. I do not even look at the 1hr and 4hrscharts, because they are not worth to be looked at.

4. Trade one special currency pair and master it.

I don’t know what mastering a currency pair mean. Each currency pair can form some strong trade setupsevery now and then. When you work with the time frames like daily, you can follow several currency pairs.It doesn’t take you more than few seconds to check each chart.

Of course some currency pairs are not good. For example, I don’t check AUD/NZD, because its spread isusually too high, its movements and trade setups are not strong enough and… . I do not follow the exoticpairs too.

5. Having no stop loss.

You will lose all you have in your account if you set no stop loss, no matter if you have won in one milliontrades consecutively. This is the lesson those who use no stop loss will learn sooner than later. Do not learnit the hard way.

Good luck

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Let’s Learn from the Others’ Mistakes

http://www.fxkeys.com/lets-learn-from-the-others-mistakes/[8/9/2015 7:52:11 PM]

Article by Chris Pottorff

"Whether you think you can, or you think you cannot, you are right." - Henry Ford

26 Comments:

1. Toh August 3, 2014 at 10:07 am

It’s a great article as usual.

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2. Joshua August 3, 2014 at 12:40 pm

God bless you for the warmth advice.

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3. Ayobami August 3, 2014 at 3:40 pm

Truth is truly bitter. Thanks for this your great article.

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4. Essar August 4, 2014 at 2:04 am

Very simple and informative, well explained…deserve immense appreciation for your contribution toaspiring traders…….well done!

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5. Vinod August 5, 2014 at 1:41 am

Dear sir. you always write in your articles that bigger time frame is good for the trading and dailychart is suitable. kindly tell us how to trade with Daily candle. and how to take position of trade inDaily chart. what to see in daily chart before doing any trade. whether to move in small time frame totake position. any article for the same.

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Chris Pottorff August 5, 2014 at 6:30 am

Hi Vinod, My friends and me having been trying to explain how we trade during the past 5weeks. If you refer to our archive, you will find the answer of your questions:http://www.fxkeys.com/archive/

Let’s Learn from the Others’ Mistakes

http://www.fxkeys.com/lets-learn-from-the-others-mistakes/[8/9/2015 7:52:11 PM]

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6. Prem Kumar December 26, 2014 at 11:58 am

Sir,

Your articles are motivating and guiding us. Thank you.

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7. San December 26, 2014 at 5:41 pm

Can you please elaborate on this“For example, I don’t check AUD/NZD, because its spread is usually too high, its movements andtrade setups are not strong enough”

How to determine which currency pair has higher spread?

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Chris Pottorff December 27, 2014 at 8:07 am

This is what we have experienced with AUD/NZD, compared to other pairs.

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8. Duane December 26, 2014 at 7:13 pm

Hey Chris, this is one of the best articles I have ever read on trading. Thanks for sharing yourknowledge!!

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9. Istvan Erdelyi December 28, 2014 at 3:35 pm

Lol, You Are All sheep!One can not win but broker!

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Istvan Erdelyi December 28, 2014 at 3:40 pm

At all this article is great.You see the very problemsand every minute is waste of time.You had better deal with your job and family!

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Istvan Erdelyi December 28, 2014 at 3:41 pm

Let’s Learn from the Others’ Mistakes

http://www.fxkeys.com/lets-learn-from-the-others-mistakes/[8/9/2015 7:52:11 PM]

I agree with all featuresmentioned. It is state of art.

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Chris Pottorff December 29, 2014 at 1:54 am

A professional profitable trader can spend more time with family. It is OK to hold your timejob and at the same time trade forex:http://www.fxkeys.com/how-does-it-feel-to-be-a-professional-full-time-forex-trader/http://www.fxkeys.com/when-quit-your-job-as-a-forex-trader/

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Chris Pottorff December 29, 2014 at 1:53 am

Of course brokers make a lot of money, specially market maker brokers, because over 95% ofthe traders lose.

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10. Paul January 1, 2015 at 10:21 am

Thanks

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11. TJ Chance May 9, 2015 at 6:08 pm

Hi Chris, You must have been a psychologist in another life. I mean, you explain so well whatneeds to be understood. I am pretty sure that if you have some children they are very well-educated.Thanks again sir.

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12. Jae Task May 13, 2015 at 12:52 pm

I have just read this again for the second time and its even more informative. Thats the thing withFxKeys, there is so much to take in, its impossible all in one go. Sometimes I have read 10 articles aday and its too much. The slow and constant way is the way to go.

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13. Fx Learner May 18, 2015 at 8:16 pm

Very useful ! Thanks.

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Let’s Learn from the Others’ Mistakes

http://www.fxkeys.com/lets-learn-from-the-others-mistakes/[8/9/2015 7:52:11 PM]

14. Muhammad Hassan` June 17, 2015 at 1:18 pm

nice one,,,,,now i remember my mistakes too..and trying to learn carefully

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15. Michael . July 4, 2015 at 5:21 pm

I feel like i’m getting mixed signals on FxKeys. In this article for example, you say

“The only moving average that the markets show reasonable reactions to it, is the Bollinger MiddleBand which is a 20 simple moving average. The other moving averages are money suckers.”

and

“Many of the indicators like Stochastic are money suckers too.”

Yet there are multiple articles on FxKeys about the benefits of moving averages (50-day, 200-day)and stochastic indicator. It’s like they are written by different people with opposing views. As abeginner, that’s really confusing. I don’t know what to believe anymore. One article teaches onething, then another teaches the opposite (or so it seems to me anyway).

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Chris Pottorff July 5, 2015 at 12:32 am

Michael,

I have also explained in many of my articles that all indicators, including candlestick which is myfavorite, are money suckers if one doesn’t know how to use them:http://www.fxkeys.com/stochastic-oscillator-a-mechanical-indicator-for-forex-trading/

All systems and indicators work if you know how to use them and if you wait for the strongsetups.

In those articles, that are mainly written by me, I have explained the proper application of thoseindicators.

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Michael . July 5, 2015 at 11:04 am

Chris,

I see what you mean and i agree. Nevertheless it still looks strange to me that “Tradingusing the indicators like moving averages” should be filed under “technical mistakes”. All ofthe other ones, like short timeframes, no stop loss, etc belong in the list without question.I just have doubts about the first one. But with the added explanation you gave, it makessense. Maybe it would be better called “using indicators without the proper knowledge” orsomething similar.

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Let’s Learn from the Others’ Mistakes

http://www.fxkeys.com/lets-learn-from-the-others-mistakes/[8/9/2015 7:52:11 PM]

Chris Pottorff July 6, 2015 at 2:23 am

Michael,

I have been thinking about you when I was not at the computer during the past fewhours. Maybe you are not the one that feels confused. Please read my most recentpost and decide about the trading system you want to follow. You can choose any ofthe candlestick + BB or Stochastic systems:http://www.fxkeys.com/quick-start-guide-for-new-forex-traders/

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Michael . July 6, 2015 at 6:03 pm

Thanks, that’s a great article, i had not read it before. It’s much simpler thanthe “5 steps” article, even though i still want to read every link in that as well.I’m determined to learn the candlestick + BB system, but maybe i’ll try thestochastic semi-mechanical system as well, in a separate demo account.

(0)

16. aleem abdul July 11, 2015 at 10:21 pm

IT is really amazing to see your noble act of helping other traders to achieve success trading forex.

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