You’re new to forex trading, and you’re not entirely confident in your abilities. That’s fine. You’re not alone. At the same time, you don’t want to be just like most new traders who end the day at a net loss. Here are some of the more common mistakes you can make, and how to avoid them.
You Don’t Make Consistent Decisions
Of all of the forex trading mistakes, this has got to be the most common. Almost everyone has a problem with consistency when they first start. Everyone figures that the forex market is simple enough. You have a 50/50 chance of profiting. You either win or you lose on every trade. But, there’s more to it than that.
Sure, you either win or lose on every trade, but there’s a lot that happens between and during trades that affects your profits. A successful trade involves making disciplined decisions about stop losses, when to take profits and when to ride out the trend. Most new traders don’t have a clue about how to make rules for themselves and how to stick to those rules.
So, this is the first step you can take that will keep you out of trouble: set trading rules – specifically entry and stop loss rules as well as trading capital rules.
You Want Revenge On The Market
Getting emotional about the market is always a bad trading strategy. The market doesn’t care that you lost any money. It just operates according to certain fundamental principles. Your job is to merely take profits. When you lose, do not take it personal. It’s hard, but what’s the alternative?
You Have No Real Experience, But Trade Anyway
It’s generally a good idea to watch someone else trade before you open your own account. Trading is kind of like a trade profession. If you’re going to be doing it even semi-professionally, you should either hire a coach or make friends with a professional trader.
Ask them about their forex trading strategies and sit and watch them execute trades. Get a feel for the market, how it works, and how the technical and logistical processes of trading work. Then, open up a practice account and do paper trades before you put any real money on the table.
You Don’t Use Stop Losses
You need to use stop losses. Stop losses control you losing positions. It’s as simple as that. Everyone who is serious about trading uses them. So should you.
You Cash Out Too Early
Don’t cash out a position before you’ve had an opportunity to profit from it. Know when you can profit and when your position is a lost cause.
You Ignore Larger Trends and Time Frames
Short-term trading has become so popular that many traders have completely forgotten about the long-term trends and analysis. Often, long-term trends pay out more than short-term market chasing. If you can spot a long-term trend, don’t be afraid to enter a position here and ride it out. Even if you have to wait months for a profit, it’s usually worth it.
Author Bio: Lewis Patterson is a long-time Forex trader and avid writer. When he’s not checking the Forex futures, he’s writing about it for various financial and trading blog sites.
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