Mistakes are unavoidable in trading even if you are an experienced trader. However, many mistakes are avoidable, but there are FX traders who keep on repeating the same errors. If you are new to Forex trading, then below are some bumps and errors you need to get familiar with. It will help you take proper steps and avoid it.
New traders are excited and thrilled, when they start trading, but be realistic in your expectation. You will not make profits from the word go. There are exceptions that you may turn out to be the next millionaire, but you need to ride on the road majority of traders did and it is bumpy! It doesn’t mean you will not succeed. Over time returns can compound even with a small capital.
Successful trading is a blend of knowledge, mindset, and personality traits. Remember, without commitment and hard work you can develop them or you will surely fail.
Ignoring a trade plan
Having goals and positive attitude goes a long way, but trading randomly or based on guts is disastrous. Forex market is unpredictable and there is no standard method to follow. Trading does not pressurize you to lose. You are responsible for developing a trading plan that empowers you to act correctly. The trading plan will define your entry and exit from the FX market, how to handle emotions, and money management.
Not testing your trading strategy
If you ignore back testing your trading strategy the chances of losing trades increases. You can test your strategy by opening a free Forex demo account on adss.com. Strategy optimization will boost your confidence in your system and yourself.
Trading against trend
High number of investors jumps in to catch the market bottom and top. It doesn’t mean you cannot, but if you struggle to see outcomes consider trend trading. For effective FX trading it is wise to flow with the trend. Other added benefit is you trade less, which also reduces your commission expense.
Not closing losing trades quickly
Emotions bring out the worst in majority of traders. They hope for a reversal and postpone closing a losing trade. It backfires and they suffer a huge loss or several losses. It is smart to take loss, when they are small. Risky gambles can always lead to losses and a deep dent on your bankroll.
Ignoring long timeframes
Many traders hate to wait for trading signals, so they neglect the long timeframes. In short time, they wish to make several trades and boost their winning chances. It often causes them to lose money. Trading on small chart is good, but make sure to concentrate on quality instead of quantity, especially when you have a working strategy.
If you are new, then trade longer timeframe. The difference is time commitment and patience. You get more free time to spend with your family and there is no proof that frequent trades are more profitable.