Common forex trading mistakes! How to avoid them!?

This article will discuss all of the main mistakes that traders frequently make in the forex markets. From the most popular ones to the less common ones, this article will give an overview of all the fundamental things to look out for and avoid when you start trading forex.

The most common mistakes made in forex trading:

Lacking education:

The first and largest forex beginner mistake is not having a full comprehension of how the markets work. 

In fact, beginner traders know so little about financial trading that they often don’t even know where to begin. So how can traders avoid making forex trading mistakes?

By studying, reading, watching webinars, attending trading courses and practising on a Demo account. 

Skipping the trading plan:

Not having a forex trading plan is one of the most extensive mistakes that forex traders make. Possibly, the reason for this is due to traders not having a clear comprehension of what a trading plan looks like.

What is a trading plan?

Is a rigid group of rules, half of which a trader draws from their trading strategy, and the other half comes from their money management strategy.

Here is what it might look like:

Certain market conditions for entering a trade

The sum of money to risk in a trade

Certain market conditions for getting out if you are wrong (stop-loss)

Certain market conditions for getting out if you are right (take-profit)

Approximate time for the market to achieve your target

Note down and record everything

Undermining money management:

Several things a trader must ask themselves, to avoid making this forex trading mistake:

Am I investing only my risk capital?

What is the maximum % of my entire investment that I am ready to risk in one trade?

What is the maximum sum of trades I can have open at the same time?

 Money management might get tricky because it is strategy dependent. Read more .

Setting the wrong goals:

If making money is the trader’s only goal, especially at the early levels of their trading career, chasing the money may become the very reason for failure.

Chasing money because of breaking the rules of your trading plan. In rare certain trades, breaking these rules may cause a higher yield. In the long run, it leads to an empty account balance. This may occur in one of the following methods, or via a combination of them: Overtrading, and Over-analyzing.

Overtrading: one of the mistakes many forex traders make may come from inadequate capitalisation, resulting in a trader applying high volumes that are too large, relative to their account balance, or it may come from a trading addiction, resulting in a trader opening orders frequently.

Overtrading problem one – insufficient capitalisation:

Forex trading comes on high leveraged accounts as it is. Not having sufficient money to manage simply improves the chances of a disaster happening.

Careful money management allows you to make some room for the forex mistakes that you will inevitably make, simply as a part of your learning process.

How can traders escape under capitalisation without breaking the risk capital rule? The answer: Save money! You can do it. Read more.

Overtrading problem number 2– trading addiction:

The market goes on, the money flow is real. It is as if the market wants to be traded. This delusion should not direct your trading. 

Chasing money takes its toll. If one is aiming to raise one’s profits, a trader bends their strategy just ever so slightly, entering where they should be patient, and exiting where they should be tranquil. Over-analysing comes hand in hand with overtrading.

One of the biggest mistakes made by forex traders is thinking that they can direct the market. Once the market price is where you want it, you trade. Read More

About Marketsbloom:

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By registering with us, you will gain amazing insights into common issues traders face as well as how to instantly improve your trading approach. Our team of experts will be with you every step of the way on your journey to becoming a better trader.

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