When I started trading around eight nine years ago, I saw many trading gurus recommend things with high confidence.
But when I gained enough trading experience, I learned that many things trading gurus said were complete nonsense.
So here are five lies trading gurus told me when I was a beginner trader.
Number one: Trading gurus said that when you flip a coin, you don’t know which side the coin is going to land on.
Your win rate is fifty percent here.
But if you win two hundred dollars every time the coin lands on heads, and you only risk losing one hundred dollars if you are wrong, then you are guaranteed to make money in total in the long run.
Trading gurus used this coin toss logic to justify taking high reward-risk ratio trades.
But I have learned that real trading is not like a coin toss.
If you aim for bigger profits than your risk, your win rate actually goes down in trading.
It doesn’t stay the same fifty percent like a coin toss.
When I was a beginner trader, I saw many trading gurus always use high reward-risk ratios on all setups because of this coin toss logic.
But after gaining enough live market experience, I have learned that not every setup works with high reward-risk ratios.
I have even seen some setups where smaller reward-to-risk ratios make more money in the long run.
Number two: When I was a beginner, I saw trading gurus set profit targets like this.
The funny thing is, they even showed examples of how their last trade made a good profit because of setting big profit targets like this.
But whenever I tried setting big profits, I was met with continuous losses most of the time.
I later learned that the probability of price making a big move like this is really, really low.
I’m not talking about the win rate being low because of the high reward-to-risk ratio.
I mean, the price literally doesn’t make crazy big moves most of the time.
It usually makes big moves during a news event or in a specific scenario.
So it turned out that most of these trading gurus were only showing hand-picked setups where their big profit targets worked.
Number three: I have literally wasted thousands of hours trading one-minute forex timeframes because trading gurus said that they are good.
But I later realized that extremely small timeframes, especially in forex, are mostly market noise.
But I’m not that mad about this one because trading on smaller timeframes was actually my idea to gain live trading experience faster.
I did learn things by doing this.
But I was told that these extremely small timeframes make profits.
They don’t in the long run.
I have only found the stock market to have tradable smaller timeframes because it has lower volume compared to forex.
But that also depends on the stock and what strategy you use.
For example, I have found the VWAP trading strategy to work on smaller stock market timeframes, but most other indicators perform better on higher timeframes in my experience.
Number four: Trading gurus said to take trades when the price gives a breakout outside the support or resistance, and then set the stop loss on the other side of the breakout.
Well, I later learned that this only works in a trending market and in specific scenarios.
At most normal horizontal support resistance levels, this breakout entry sucks.
Because the trading activity increases when the price gives a breakout outside support resistance.
Many people have stop losses on the other side of the support resistance.
Many people exit and enter new trades in both up and down directions.
When all these orders get triggered at around the same time, there is higher market noise.
This higher noise starts even before the breakout when traders react to the support resistance first.
There is just more random up-and-down movement near the support resistance.
This can easily create a false breakout, and that can lead to a loss.
When I analyzed one hundred support and resistance breakouts in a previous video, this is exactly what happened most of the time.
Most breakouts failed to make a good move in the breakout direction.
Data also showed that taking trades at the retest of the breakout worked much better than trading the breakout immediately in all that noise.
Number five: Trading gurus said to take trades when the price breaks the trendline.
Some even said that it’s a sign of a reversal.
Well, no, it’s not.
The only place where the trendline has worked for me is in a pullback of a trend.
A breakout of that trendline means the pullback move is getting weaker.
That’s exactly what we want in a trend or momentum setup.
On top of that, I prefer using another entry pattern as extra confirmation before trading in that breakout direction.
Most other trendlines just show similar strengths and weaknesses of the trend.
They are not a good place to take trades, especially when you consider that market noise also triggers a trendline breakout.
Just use trendlines for trend strength analysis, maybe even to book profits when the trend slows down.
But not as an entry reason every time there is a trendline breakout.
But most importantly, whatever you do, use data and your own experience to make important decisions.
Don’t blindly follow trading gurus.
Everything I mentioned in this video was based on my eight nine years of trading experience and tested data.
That’s all!