Smart Money Concepts for Beginners

Many beginner traders make several key mistakes. The first is setting stop losses too tight. Imagine you invest 1000 zł and set a stop loss at 1%. A market move of just a few groszy causes your order to be executed, and you lose 10 zł. The second mistake is ignoring spreads. For example, you buy shares for 10 zł, but the spread is 0.10 zł. This means you have to wait for the price to rise by 0.10 zł to break even. Finally, slippage – let's say you want to buy for 1000 zł, but due to a lack of liquidity, you actually buy for 1005 zł. That's an additional 0.5% loss right from the start.

These errors are problematic because each of them accumulates over time, significantly reducing profitability. Tight stop losses, when they are too close to the entry price, are often triggered by normal market fluctuations before the price has a chance to move in the anticipated direction. Spreads and slippage increase the actual cost of transactions, which means you need to achieve a larger profit to break even. For beginner traders, who often operate with a small capital, this means less flexibility and greater risk of losses.

Assume you have a capital of 15,000 PLN and you make these mistakes during each transaction. The average slippage and spread can cost you 0.5% of the transaction value, which for a capital of 15,000 PLN amounts to 75 PLN. If you typically execute ten transactions per month, the monthly loss from this would be 750 PLN. Additionally, tight stop losses can cause you to lose another 0.5% on each transaction, which adds another 750 PLN. In total, such mistakes can cost you about 1,500 PLN per month, which constitutes 10% of your capital.

To improve your results, start by analyzing the market for liquidity and order blocks. Here are some steps to implement:

1. Increase the distance of stop losses from the entry price to avoid accidental spikes.
2. Monitor spreads and choose instruments with lower spreads.
3. Avoid trading during periods of low liquidity to reduce price slippage.
4. Pay attention to order blocks – places where large orders are accumulated that can halt or reverse price movement.
5. Use chart analysis to better predict where liquidity is and how it may affect price movement.

Regularly analyze liquidity and order blocks before each transaction.