We make mistakes, and there is no doubt about it. The most experienced traders make mistakes as well. Some errors are unfortunately much more expensive than others. These mistakes should be avoided at all costs. Do not want to risk your account because you have committed a fatal error?

The first “sin” is the lack of adequate standards of money management. There is no greater mistake a trader can do for the account. There is no cure for the retailer that has no appropriate rules of money management in place. This error costs about 95% of new merchants to their accounts wiped out within 6 months of trading in forex. Further more, this error is so expensive and painful, because the application of money management rules is a very simple one merchant can do in the beginning of any business! Money management is a science, and there is no need for the merchant to use guesswork or intuition, or the basis of their trade on a gut feeling. “Proper money management rules provide that if you decide to trade for a living, you need to have proper money management which will be the deciding factor between making a lot of money or starve!

The second “sin” is the lack of a trading plan. You will be surprised how often traders base their trading decisions on emotion rather than rational thinking. To prevent this from happening is important that you are equipped with a rock solid trading plan. Sometimes you may lose in its negotiation. That is acceptable because it is expected that the rules of money management. You are still in a profitable point. Your trading plan gives an advantage. We can define an edge as a greater likelihood of success. There will be times when you may only break even. It’s still better than losing money, so when that happens to me, I am thankful and move on to my hand hoping the trade will be an official win.

The third “sin” is the lack of discipline. There is no cure for the small trader who lacks discipline. No dealer can expect to be profitable without discipline. The reason is that if we, as retailers do not practice our trade and money management plan with the greatest diligence that ultimately will fail.

There is no easy way around it, there can be no compromise when it comes to discipline the trade. So what constitutes trading discipline? Discipline in the trade means that operate in your plan and stick to the rules of money management in all circumstances. When things are going well and you are gaining profits in series, the temptation to increase the size of the lot is also very large. This is when real problems begin.

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