Forex Trading has been around for a long time and therefore we can learn from people’s past mistakes. Below we have listed several common mistakes that beginners and even veterans will find themselves committing when they go about their trades. Avoid making bad trades and losing money by being aware of these common trading mistakes.
1. Being Impatient
Patience is an important virtue to have if you wish to become a successful trader. Making impromptu decisions without proper research and careful thought will result in a lot of bad trades. Once you make one bad decision you may become more impatient and get caught into a spiral of bad decisions and trading.
Newcomers and emotional traders are the most common culprits of over-trading. Whether you lose or win, it’s important to analyze your next move. Forex trading can be very addictive and your emotions could play a role in influencing you to deviate from your Forex trading plan. Work out an effective strategy and stick to it, don’t give in to the temptation to over-trade. Especially when you are experiencing a lot of losses, step back and review the situation instead of over-trading to compensate for your losses.
3. Getting Your Emotions Involved
Any experienced trader will tell you that winning and losing are both part of the trading process. It’s important that whether you made profit or loss, you don’t let your emotions dictate your actions and decisions. Effective Forex trading involves disciplined and strategic bidding and selling. When emotions get involved, you become too eager to disregard facts in favor of feelings. The more you trade and train yourself to stay disciplined, the easier it will be over time to control your emotions.
4. Ignoring risk/reward
Any experienced trader will know how to manage their risk/reward to protect their capital. It is possible to make money while losing most of your trades if you are smart about how you implement risk/reward. Never risk too much, every dollar you invest in Forex trading should be a dollar that you can risk losing.
5. Not Designing Your Own Trading Plan
Figure out what kind of trader you are and find a strategy that works for you. There is no perfect trading strategy that works 100% of the time, instead find a trading plan that gives you the most success and feels comfortable. Are you a quick-thinker or someone that takes time to research and analyze? Find out your own unique trading style and tailor a specific trading plan for yourself.
6. Bad Money Management
It is common practice to never risk more than 2% of your total capital in one trade. Learn how to properly manage your money so you don’t blow your account.
7. Thinking You Need to Win Every Trade
It always sucks to lose at anything, but you should always look at the bigger picture when you trade. It isn’t about your win/loss ratio, it’s more about how much you win or lose on your trades. You can still make a lot of profit even though you lose most of your trades if you understand risk/reward. Rather than concentrating on winning each and every individual trade, try to concentrate on monthly Forex trading profits.