Learning how to trade is a great path toward Forex mastery; but during the learning process there are some common trading mistakes that most traders struggle with. As a trader, I have struggled with some of them at some point in my trading journey and I am still guilty of a few even at this level of mastery.
In Forex, learning is a continuous process; and if you want to be top of the game, you need to constantly seek for knowledge. As a mentor, I am constantly in search for knowledge because with the introduction of new assets to the market regularly, I have a duty to my growing community to study and understand this new addition in order to guide anyone who wises to explore the possibilities of adding this new assets to their trading calendar.
I am not a fan of trading many asset. I have 10 asset in my trading calendar but I trade just 4 of them daily; I am going to explain this shortly, let dig in.
6 Common Trading Mistakes and How to Avoid them
1. No trading plan.
This was the first hurdle I struggle to overcome when I started trading; as a beginner you may be tempted to trade based on your feeling or impulses. The impulses maybe due to a signal or a strategy group you subscribe to or pressure from your friends. Trading without a plan is disastrous; I have been there, I understand the feeling, but that is not the right way to win this war. You need a well defined trading plan which outline what will inform your entry and exit in the market, your lot size, asset, etc.
2. Changing Strategy Regularly
When I started trading I was always in a constant hunt for new strategy. I will develop a strategy and use for few days; once i encounter those red trades, I will dump the strategy and immediately start another search for a new strategy. This Jumping the rope syndrome cripple my account (you all know the story); but at some point I discovered that no strategy is 100% correct, I began to develop my trading strategy and instead of changing it when I see the red trades, I try to understand where I went wrong in the trade, then update strategy to cover the gap.
NB: Find a Strategy that work and stick with it
3. FOMO Trading
FOMO trading or Fear of Missing Out on a trade is one of the common trading mistakes that most trader face ; this was my challenge at some point, because sometimes, i will spot a formation, instead of waiting for it to place out, I just jump in without considering other factors in the trade. If it was a buy for instead and the trade goes below my entry point, I will panic and add more buy positions thus exposing my capital to the market.
NB: Always use limit orders for formation you are sure off; don’t rush into any trade if the trade does not conform to the conditions you set out on your trading strategy.
4. Revenge trading
I was a victim of revenge trading till the market teach me something the hard way. See the market does not care about you and your money. The market is looking for ways to take all your money; so instead of doing revenge trading when you lost, find out what and why you lose a trade and do something about it
5. No risk management Plan.
Many traders trade with a Stop loss or a good risk to reward ratio. If you want to be a successful trader you need to always use proper risk management procedure in all your trades, Put Stop loss and Take profit level.
6. Having a get rich quick mentality.
Having a lofty expectation will only make you to exposure your trading equity unnecessarily. It’s true you can make sustainable income from forex. Of course, I have been a fulltime trader for over 5 years. Don’t see forex as a get rich scheme, see forex as an investment that needs your constant nurturing to grow. Learn, trade and follow a plan and you will build a sustainable income from Forex.
Lastly, have a good broker. I am using Deriv, you can open a free demo on Deriv by clicking here to test your strategy and develop a trading plan for yourself.