#221: The no.1 Biggest Mistake I See Forex Traders Make

Podcast: The no.1 Biggest Mistake I See Forex Traders Make In this video: 00:34 – Most traders take too big a position size 01:00 - Forget about making pips 02:40 – Understanding the current market conditions 03:26 – Reduce the risk you take per trade – use my calculator 05:40 – Trader risks it all on one trade I'd like to discuss the number one biggest mistake that I see Forex traders making. It's a really important point, let's get into it right now. Hello Forex traders. Andrew Mitchem here, The Forex Trading Coach, and this is video and podcast number 221. I want to talk about the number one biggest mistake that I see Forex traders all over making, and it's as simple as this. Most traders take too big a position size People trade with too big a position size. Their lot size is ridiculous in most cases and it causes too many problems. As a trader, these are the facts. You need to trade with low risk per trade, you need to have controlled risk per trade. You need to know what the very worst outcome is on that particular trade, and also, when you think about that. Forget about making pips You really need to forget about making pips. I've got a saying that “Pips make you poor”, and what I mean by that is that the actual thought process, like the mental approach of trying to make X number of pips is ridiculous. It is not a way that you're going to end up being a good trader. What you need to do is have low risk per trade and controlled risk per trade, so you know the worst you can do on that trade, but to calculate that, yes you need to know the stop loss of the trade, but you need to make that stop loss equate to certain percentage of your account. You see, I see people out there all the time, not really having a clue what they're doing and they're placing say one standard lot on a trade. Why would you place one standard lot? What does it mean? It's different for every trade, isn't it? Some people might say, "Oh, now I'm going to place two standard lots, or 0.5 lots." Whatever it might be, but they put the same one every single trade, and it has no relevance to what currency pair they're trading, because don't forget, different currency pairs have different amounts they pay out per pip of movement. It has no relevance to the timeframe of chart they're trading, and generally, the shorter the time frame chart you trade in general, the smaller the stop loss will be but quite likely the smaller the profit target will be in pips. If you're just out there chasing pips, it really is almost doomed from the start. There's a number of issues that people have there, so they're placing too big of a position size without really knowing what they're doing. Understanding the current market conditions The problem is, also people don't really understand the market conditions at the time. "I place a 50 pip trade," that's what you hear from a lot of people, 50 pip stop loss per trade. "Aren't I good? I'm using a stop loss." Well, what does 50 pips mean? 50 pips on a British Pound/New Zealand Dollar is very, very different to 50 pips on a Euro/British Pound. 50 pips on a daily chart is very different to 50 pips on a five minute chart, so you need to get into context of what it is you're doing and what timeframe you're trading, what the conditions are in the market right now, what currency pair. All these sort of things need to be taken into account. Reduce the risk you take per trade – use my calculator What you can do in order to help yourself is to reduce your risk that you take per trade down to something that's small, low, conserved, manageable, and eliminate a lot of the emotions involved in trading. I've got something that's definitely going to help you. I have a lot size calculator freely available on my si...