Common Mistakes Made by Forex Traders
"Ordinary people learn from their mistakes, but the wise learn from the mistakes of others." Have you ever heard that saying?
We have brought you the most common mistakes committed by traders. Avoid mistakes, learn from the mistakes of others!
"Your failure in planning is planning for failure"
It is clear to everyone that doing anything without planning exposes you to many difficulties and obstacles. Moreover: it is impossible to succeed in trading unless you own a plan.
A trading plan is a set of rules that govern your trading strategy and manage your money. The plan helps you determine the best time to enter a trade, break out of a losing position, time to meet your goals, and the amount you can take. Without it, you will undoubtedly lose.
Do not set the stop loss level
Even if you are 100% confident of the target profit, it is best to set a stop loss level. The Forex market is highly volatile and sensitive, and emergency news may change the direction of the transaction entirely against your favor. In January 2015, the Swiss National Bank unexpectedly decided to abandon its monetary policy with the support of EUR / CHF at the usual level, causing a 30% depreciation. This decision shocked everyone, and many traders who did not set the stop loss level were exposed to huge losses. If you do not set a stop loss level, you may miss out on the chance to catch up with unexpected things, exposing yourself to a real disaster.
Increase the size of a non-winning deal
Sometimes, traders are over-confident in their trading objectives, blinding them to reality reading. Imagine you opened a purchase order, but the market has fallen. However, you are very confident of the right decision to increase the size of your deal in the hope of a reversal of the price again. In such a case, you have doubled your losses. If you have any open positions, your ability to take the right decisions is usually reduced and your decisions are somewhat random. As a result, never increase the size of the losing deal.
The same happens when the trader raises the stop loss level for a non-winning transaction in an attempt to prevent the transaction from closing on a loss. Be committed to your first decision, otherwise your losses may become larger. If it turns out that the decision was wrong, analyze the deal after closing it to find out what mistake you made, learn from this experience to be able to open a winning deal next time.
Non-risk management
Traders who do not follow a risk management strategy risk losing everything. A trader can not only think of profit. You should always calculate the amount you risk losing in each deal every day if things do not work for you. If you keep the potential losses under control, you will be able to stay in the market for a longer time and thus have many opportunities to make money. Commit to the following rule: Do not risk more than 1% in one deal. You should never deviate from this rule.
Ignore news
Every trader should be aware that there are certain economic events and releases affecting the Forex market. If there is a divergence between economic indicators and expectations, currency pairs are highly volatile. As a result, every trader, even if he decides not to trade on the news, should take these events into account. Ignoring the news is a real common mistake that can easily be avoided if you plan your deals and take a look at the economic calendar.
Interrelated pairs trading
Traders usually open a number of transactions daily, but do not take into account the correlations between the currencies. It may seem that you can make money from a number of pairs, but be aware: if the trading settings of a number of pairs are similar, they are likely to be currency pairs. This means you may win or lose in all pairs at the same time. For example: a pair of USD / CHF and USD / JPY pair have strong and direct correlation: when the first rises, the second is likely to rise as well. So when you buy the couple at the same time, you double your exposure to risk.
Attempted compensation attempts
It is difficult to accept loss, especially for beginners, so they try to take revenge from the market to compensate for losses. Such deals are usually 2-3 times larger than the losing deal. As a result, they lose more money. Loss is a fait accompli. Do not rush to do such a reaction, but focus on analyzing the losing deals and developing your skills in the future.
Lack of experience and knowledge
Lack of experience and education leads to errors and losses during trading. If you want to make money, read educational books, learn more about indicators, and practice new strategies.
In the end, it is normal to make a number of mistakes during trading. If you do not make mistakes, you probably do not do anything. However, if you can avoid the common mistakes mentioned in this article, you will be able to succeed more quickly.
