Evidence has shown that there are certain forex trading mistakes which seem to be conducted more frequently than others. Effective forex traders are those who are aware of these errors and have learned how to avoid them. However, avoiding a mistake is not enough. It is important to be aware of both what the mistake is and how to handle it should you ever experience the situation. This will reduce the chance of both physical and psychological distress.
1. Forex trading without the fun factor
Forex trading may be an extremely stressful occupation but it also extremely enjoyable if you are trading effectively. A forex trader who is not enjoying the trading environment is more than likely experiencing more losses than profits. This leads to great amounts of stress and anxiety which results in only further detrimental losses based on emotional trading. It is important to enjoy your forex trading and remove yourself from the environment if you are not having fun.
2. Having the wrong attitude
In order to be an effective trader you must have the correct attitude. Successful traders all present with determination, confidence, patience and persistence. If you find the foreign exchange market too difficult to handle then you will not experience profitable trades. Each trader faces both good and bad days so you must accept the losses with the profits. If you are having difficulty accepting this fact you will more than likely find yourself a victim of emotional trading. Should this occur you will soon experience more losses than profits.
3. Forex trading on a rumour
In order to gain profitable trades your trading should be based on analytical fact rather than third-party rumour. If you get some tip for a trader stating that a specific trend is about to appear, it is advised that you first verify the information before trading on it. Sometimes the ‘tip-offs’ are correct but it is best to be safe than devastatingly sorry.
4. Living for the trade
When trading on the foreign exchange market you must learn how to maintain a lifestyle balance. It is important that you do not dedicate your life to forex or you face the risk of trading addiction. One must always take a break when trading during regular intervals. If you do not the chances of emotional trading due to stress and exhaustion are high. You should also schedule ‘rest days’ where you don’t trade forex at all. In order to be a successful trader you must establish this balance between forex trading and the rest of your life.
5. Losing focus on the market
One of the most common mistakes is losing focus when trading. Many forex traders lose track of their trades while completing some other task. This loss of attention can lead to disastrous trades as you may miss a swing in market movement. however, if you have a trading strategy that is set up to trade without too much individual input you do not have to concern yourself with this to such a great extent.
6. Not learning from errors
Effective traders are those who learn from their mistakes. An important method to success is reviewing your mistakes and adjusting you strategy to ensure they do not happen again. If you keep repeating the error you will more than likely remain an unsuccessful trader.