5 Big Mistakes, check how many are you doing?
How are your Forex Trading endeavours going? Good? Bad? Whichever it is, you need to make sure that you are not making these big mistakes that could prevent you from maximising your profits and minimizing your losses in the forex market.
Which Mistakes Are you Making?
Not being prepared
The forex market is quite unpredictable, and it is very difficult to not get caught up in your emotions and try to make the most out of the opportunities presented to you, forgetting what you're supposed to be doing.
To avoid this, create a trading plan and document everything in a trading journal. Main things you should cover include an outline of your entry and exit conditions, and risk management rules. Make it a habit to always refer to your journal as you record and review your progress.
Trading Without Setting a Stop Loss
Not setting a stop loss order means that you’re trading with an open-ended risk, as positions can easily fluctuate depending on market conditions and price movements.
No stop loss means that there is a greater risk of exaggerated losses due to the fact that losing positions are not limited to a certain level, making you vulnerable to big swings against your position. Setting up a stop loss order assures that any losses incurred are small enough to be managed and recoverable.
Revenge Trading
As a trader, you can sometimes become emotional over losses and begin to trade out of emotion and not logic. Revenge trading can occur over a lost trade as a trader tries to aggressively recover from the loss.
Revenge trading can have double or even triple the position size of the previous lost trade. Traders do this in hopes of having the account go back into positive territory as soon as possible. Instead of trading emotionally, focus on what went wrong and see what you could've done differently for future trades.
Not Cutting Losses Early
Instead of hoping for a price reversal or moves in the market that will work in your favour, cut off your losing trades early rather than letting them run all the way to their stops.
Ensure you are looking out for signals that tell you to exit your trades early. Therefore, it is important to watch economic calendars that report on any events that might cause a price to move against you.
Expecting Unrealistic Results
While having goals is important in keeping you motivated and disciplined, having unrealistic goals can be your downfall and cause great disappointments.
It is important to remember that you will be a more experienced trader by continually learning from previous mistakes and practicing your skills.
Other Common Forex Trading Mistakes
Holding onto winning positions too long
Now the opposite to the previous point would be this. Seeing huge profits come in can lead to overconfidence and euphoria. Wanting to push further is a common human reaction. However due to potential market volatility, the outcome can change very quickly. The way to counter this is to set take profits to automatically secure the ideal amount that you would like to gain.
No Trading Plan
Do you often find yourself ‘winging it’ while trading? Well lots of traders tend to fall into this trap and just go with their gut. Having a trading plan is the best way to remedy this issue. Focus on how much capital you are willing to invest, appropriate leverage for your circumstance as well as when to enter and exit a trade. Tonisignals can help with your trading plan with signals of when to enter a trade.
Poor Risk Management
To manage risk properly, understanding the risk to reward ratio is important. A ratio of 1:2 means that there is a potential to make double the amount risked, for example risking $100 on a trade to make $200. Poor risk management may also involve risking too large an amount on one single trade.