#TradingMistakes101 The PDF you've shared, titled "Trading Mistakes 101" by Steve DeWitt, is a practical guide from The Forex Journal (November 2008) that identifies 12 common mistakes traders make in the Forex market. Here’s a detailed explanation of the concepts from the document:
1. Not Using a Trading Plan
Most traders jump into trades without a predefined plan. A trading plan includes:
Entry and exit strategies
Stop-loss placement
Profit targets
Risk assessment
Time expectations
Without this, even large paper profits often turn into real losses because the trader didn’t plan where to exit if right or wrong.
2. No Money Management Plan
Even with a good strategy, poor money management ruins traders. Key ideas:
Understand both risk/reward ratio and win/loss probability
Example: Risking ₹1000 to make ₹500 is okay only if the trade works 8 out of 10 times
Learn to calculate statistical edge, not just focus on rewards
3. Not Using Protective Stop Losses
Using mental stops is dangerous. Emotional decisions override logic when losses mount. Always:
Use hard stop-loss orders
Never remove or increase stop losses to take on more risk
Accept that hitting a stop often means your analysis was wrong
4. Taking Small Profits, Letting Losses Run
Due to fear, traders exit winners too early and let losers continue in “hope.” Fix this by:
Having pre-planned take-profit and stop-loss levels
Avoid emotionally influenced decisions mid-trade
5. Overstaying Winning Positions
Greed makes traders wait “just a bit more.” This often leads to:
Giving up large profits
Watching a winning trade go back to break-even or loss Use trailing stops or exit at pre-set targets
6. Averaging Down Losing Positions
Adding more to a losing trade (“doubling down”) without a plan is dangerous in Forex due to leverage. Exceptions:
Only do it if your strategy is pre-designed for such scaling
Always use protective stops across the entire position
7. Increasing Risk After Success
Confidence from success leads many to:
Increase trade sizes
Risk more per trade (beyond 6-16%, or even 25%)
Beginners should limit exposure to 1–5% per trade, and avoid overconfidence traps
8. Overtrading
Taking too many trades, especially during market consolidation or after a streak of losses, leads to burnout and capital wipeout. Solutions:
Never risk more than a fixed % of your account per trade
Ideally, trade one position at a time (unless hedged)
9. Not Taking Profits Out of the Account
Most traders leave profits in their accounts, hoping for the "big trade"—only to lose it all. Instead:
Set equity milestones (e.g., every ₹20,000 earned, withdraw ₹5,000)
Diversify earnings outside of your trading account
10. Changing the Plan Mid-Trade
Don’t alter your strategy during market hours unless critical news breaks. Pre-plan your moves during calmer hours and stick to them
11. Lack of Patience
Many trade for the thrill, not profits. The average life of a trader is 5 minutes to 9 months. Solution:
Wait for high-probability setups
Be okay with no trades for days
12. Lack of Discipline
The most crucial skill. You need discipline to:
Follow your plan
Cut losses
Take profits
Stay emotionally neutral
A good exercise: Watch the market for a full day without trading, even if perfect setups appear. This builds mental control
Final Insights