If you want to avoid Common Trading Mistakes, read the rest of the article to learn more…
Everyone enters the Forex market with the intention of making money.
But, not everyone gets to reach the goal of making money.
Some traders reach the intermediate level and fail.
And some others leave the market right after entering it.
But, some traders still persist in trading the Forex market despite the difficulties and risks.
What do you think about those traders?
Well, the ones who persisted in the market might have had clear intentions of becoming successful in trading.
And the ones who failed to remain in the market would have had the thought of making money.
But remember, when you set a goal you must have pure intentions in succeeding at it.
You must not look at the profits alone. Instead, you must think about success as well.
But there’s something I didn’t point out above.
Yes, trading mistakes. Most naive traders who leave the market halfway make a lot of trading mistakes.
Indeed, Forex is a profit making market, so even a tiny mistake can lead to severe failures.
Hence, just like other markets in the financial industry, you must follow a few guidelines to trade Forex successfully.
But, unfortunately, beginners don’t have the patience to study the guidelines before entering the market.
Anyway, I have concluded a list of common trading mistakes made by Forex traders.
If you understand the mistakes, you’ll be able to avoid making them in the future.
As I mentioned earlier, Forex is all about self-learning.
So, let’s start!
In the Forex market, there are so many opportunities as well as threats.
As there are plenty of threats, you must prepare yourself to handle threats successfully.
However, most Forex variables distract traders when they are trying to think straight about trading.
If you want to find the right strategy, you must overcome all these problems.
But, this can be tough for beginners.
Anyway, you still have to find a good strategy to trade the market.
So, even after finding a good strategy, how can a trader face the analysis-paralysis problem? Yes, it is still possible.
Most naive traders assume that they must look for more because more is considered better.
But, in trading, more is never a good thing.
Do you think that spending the whole day in front of the screen will help?
Well, it will not help. In fact, it will lead to further confusion.
You might come across numerous indicators, and it may give the idea that your current decision is false.
And, that makes you emotionally weak, so this is when you fall into the problem of analysis-paralysis.
The solution is to stay away from the market if you have entered into a trade.
The more you watch the market, the more you get confused.
Most beginners don’t get to go a long way in trading because they over-trade.
This may sound like something simple, but it is not!
Trading way too much will lead towards losses.
And there is no counter argument on this.
The interesting yet sad fact is that naive traders make great profits in demo accounts, but when they trade live accounts, they trade terribly worse.
But, you must understand why this kind of behavior is present in beginners.
Basically, when a trader trades the demo account, he or she doesn’t become emotional.
The reason is that the trader knows the demo account isn’t real and even the money is fake.
But, remember, if you don’t practice, you will not trade well in a live account. The underlying reason for over-trading is emotion.
The traders get attached to the market emotionally, and they over-trade as if they will not end up blowing their account.
You can actually control over-trading.
But for that, you must have a defined plan that you adhere to.
To be said simply, instead of trading you are gambling!
Instead of trading like a reckless gambler, you must develop a calm and realistic approach to trade the market.
Of course, if you have been over-trading for some time, it will be difficult to stop at once.
But, for now, you must not trade the live account, instead consider demo trading.
Take some time to understand over-trading and the effects of it.
Once you understand, you will not make a mistake again.
Risk and money management
Another mistake made by Forex traders is not managing risk and money when trading the market.
If you want to achieve success in trading, risk management is important.
The simple definition of risk management is controlling the risk to the level that you can handle.
The beginners often follow this denial concept.
They deny the fact that they may lose any trade at any time.
They believe all the ads and fabricated stories about quick money in trading.
Hence, they don’t give enough attention to risk and money management.
Just think, how reasonable it is to risk more than the amount that you can handle losing?
Sounds insane, right?
But, this is one of the most common mistakes.
A single trade can wipe your account completely if you don’t control the risk. If you don’t manage risks, you are going to lose everything.
If you are dreaming about profits, it is a good sign because you are motivated to make profits.
But, if you are dreaming ONLY about profits, then it is not a good sign.
You must think about losses as well. You must find the risk ratio that you can afford to lose.
Most professional traders and Forex mentors recommend 2% risk, but still, the decision is in your hand.
You must decide the ratio that you are comfortable with.
Improper or no trading plan
Not having a plan or having an improper plan both fall into the same category.
Having an improper plan is more like having no plan.
So there is not much difference.
This is also another mistake made by naive traders.
Most naive traders assume that they can create a plan later but that later never comes.
Besides, you must have a plan when you enter the Forex market because, without a plan, it is tough to enter into or exit a trade.
A plan makes you stick to your goals.
When you don’t have a plan, you tend to make decisions emotionally.
You will pick some random trading strategy, and you will use any approach to enter into a trade.
Plus, you will exit a trade without considering any important factor.
Thus, if you have a plan, you’ll plan your trade execution.
Before selecting a trading strategy, you’ll shortlist some of the strategies.
And you’ll have an exit plan.
Likewise, you’ll be trading like a professional.
Of course, even professionals must have a plan.
But more than a professional, a naive trader must have a plan to keep things organized.
It is crucial to have a written plan that acts like a road-map.
Honestly, there are numerous benefits that you gain from trading with a plan.
If you don’t believe it, you can test it on a demo account.
Typically, when you do something without a plan, your vision will be absurd.
Thus, a plan keeps your vision clear.
You will know when to exit a losing trade and when to extend a profitable trade.
So, it is all about having an effective trading plan!
Trading or gambling
Trading and gambling are two different things.
But, due to greed, the difference between trading and gambling have become something that is hard to define.
Of course, beginners have the urge to enter into the market.
But once they enter, they don’t think about ethics and morals.
Instead, they develop a gambling mindset.
They start trading as if they have been practicing trading.
Well, you must not enter the live trading account if you have not mastered your trading strategy, techniques, or approaches.
The way to differentiate yourself from a gambler is to practice trading.
You must start with a demo account.
Remember, you must not trade the demo account for the sake of trading.
Instead, you must trade it for a certain period until you become comfortable with Forex trading.
But then, some traders will not have real emotions when trading the demo account.
Hence, it can be tough to manage emotions while trading the demo account.
So for this, you must try your best to keep your emotions real while trading the demo account.
Only if you keep your emotions real will you be able to manage to live trade successfully.
There can be times when you are confident about the profit targets.
But, it is always better to focus on stop-loss placement.
You already know that Forex is a volatile market where things can change in seconds.
There can be certain events that will change the currency values in a short time.
These events will have a huge impact on your trading decision.
Hence, stop-loss will protect your account from facing losses.
Thus, even if you are a professional trader, you must not ignore stop-loss placement.
Avoiding news releases
You must understand that news releases have a huge impact on the Forex market.
Certain economic factors will create changes in the currency pairs.
Thus, even if you are not a news trader, you must keep an eye on the news releases because it will affect the currency value.
If you avoid news releases, you might make huge mistakes, so it is better to keep yourself updated about the news releases.
Increasing trading positions
Some naive traders are overconfident, so they believe that their trading targets 100% profitable.
So, even if their anticipation doesn’t go in the right direction, they still believe that the trade is going in the right direction.
And they simply add more positions with the hope of a price reversal.
If you make this mistake, you’ll be increasing the losses created.
If it’s an open position, you must never add more positions to it because it will become a chaotic situation.
So, don’t add more positions to trade if you are not experienced enough to understand it.
Forex traders believe that they can earn more profits if they take more than one day trade.
Of course, you can make good money, but on the other hand, losses will be doubled.
When you trade multiple trades, you will also be dealing with currency correlation.
When the currency correlations have a similar setup, both losses and profits can occur.
If you are handling with currency correlation, you must remember that you are dealing with risks.
Revenge is not sweet
If you are a naive trader, losses can be tough for you.
But that doesn’t mean professional traders are happy about losses.
Even the professional traders don’t prefer earning losses, but they don’t take revenge from the market.
On the other hand, naive traders take revenge.
The revenge trading will not do any good to you because you will end up facing losses.
However, to avoid all these you must accept the fact that losses are possible in trading.
You can’t run away from losses.
But, you can always limit losses.
Hence, instead of revenging the market you can focus on improving your trading style.
Lack of knowledge
Actually, I should have added this mistake to the top of the list.
When you don’t have the Forex knowledge, you are likely to move towards losses and failures.
To enter into profitable trades, you must keep improving your trading skills.
If you aim to become a skilled trader, you must keep feeding Forex knowledge.
Try to learn new trading techniques, methods, approaches, blogs, and educational books about Forex trading.
You must only enter the Forex market after understanding the whole market.
Most naive traders don’t make an effort to learn the market, so they lack the Forex knowledge.
If you are assuming that trading strategy will help you to support trading, you’ve got it wrong!
Along with the trading strategy, you must have all the other important knowledge to trade Forex successfully.
But remember, the knowledge that is not practiced is worthless.
Hence, you must practice demo trading with the knowledge that you have acquired through learning.
Improper trading goals
I know, money is important.
But if you begin your trading journey with the ONLY aim of making money, it will be the same reason why your journey will end.
If you want to become a profitable trader, you must set proper trading goals.
If you stop aiming for money alone, you will be able to improve your trading path as well as the account.
When you run after money without thinking about anything else, you might break Forex rules and trade without a limit.
Maybe you might earn a few good trades initially, but in the long run, you will not be able to create a successful trading path.
Selecting the wrong broker
Most naive traders don’t select the right broker because their complete attention is on making money.
They don’t think about the ways to make money.
Only if you find a good Forex broker will you be able to manage your trading account successfully.
Also, your success begins when you find a good trader and deposit your capital on the trading account.
If your account isn’t managed successfully, you will end up losing your money.
Hence, you must allocate time to find the right broker.
You can use the tips that I have mentioned already.
Not knowing the purpose
For some naive traders, Forex trading is an entertainment.
They find out about Forex trading in an ad, and they think it will fun to trade Forex.
So they just enter into the Forex market.
But, this is not the purpose of Forex trading.
If you are entering the Forex market, it is important to know for what purpose you are entering the market.
Your purpose will decide your level of commitment, attitude, and the goal.
Thus, set your purpose wisely to make money from trading.
You must be consistent in trading if you want to see yourself as a successful trader.
The beginners are usually greedy to make more money in trading.
In fact, greed is the main factor that makes traders fall into traps.
Most beginners enter the Forex market with the wrong intention, and they assume they can become rich quickly.
When you become greedy, you will begin to chase unrealistic goals.
Of course, you can set goals, but it should be realistic.
Only if you set the right goals, you’ll be able to overcome mistakes.
So for that, you must avoid being greedy to make more money.
Not understanding Forex psychology
You must understand that Forex psychology has a lot to do with Forex trading.
In fact, it is one of the major parts of trading.
Some traders fail to trade the Forex market successfully because they don’t understand Forex psychology.
Most Forex mistakes can be avoided if traders understand Forex psychology.
But, naive traders don’t even consider Forex psychology as a part of the trading journey.
I’ll be discussing more Forex psychology in following chapters so you’ll understand better.
It is not easy to learn the mistakes and to correct them when you are trading Forex.
But, you are lucky because you are warned about the mistake beforehand.
So when you are trading, you’ll not make most of these mistakes.
Studying and learning the market will always be beneficial so you don’t have to think that learning the mistakes is a waste of time.
Let me tell you, even if you learn these mistakes over and over, you will still make certain mistakes.
But, remember to correct them to become a noteworthy trader.