I was going to do a post about things I didn't know when I first started trading. I think what I will do is write a series of posts on this topic. These are mistakes I have made and those that I see other people commonly make.
One of the classics I see all the time is people waiting until an event has happened or been announced and then they act. We have all heard the phrase 'buy the rumour sell the news'. That is true but it is surprising how few people actually follow that rule. So many people I see, will stand by in the lead up to an announcement and then when the news breaks, they enter the trade only to get taken out at a loss.
A perfect example of this is the recent AUD/USD short trade. There has been an expectation for some time that the RBA would cut the official rate. Not many expected it to be at this meeting. The fact is that the best trade was in the lead-up to the announcement. Now that the rate cut has been made official, those people who went short on the day of the news announcement are now in a negative position. Most people who were short this trade, bought the rumour and sold the news. The same can be said of the recent ECB QE as another example. (In this example it is a short trade, so obviously you are selling the rumour and buying the news).
I will post more in this series shortly.
AUD/USD 4hrly chart
AUD/USD daily chart
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