Are You Making These Forex Trading Mistakes?
- Thinking too much: One of the most common mistakes I see traders making, is simply thinking too much. People tend to make trading much harder than it is.
- Trading too much: Over-trading is sort of the opposite of over-thinking, in a way. Over-thinking usually leads to not trading much, if it all, because you think yourself right out of perfectly good trades. Whereas, over-trading means you probably aren’t thinking enough. You haven’t put the time to learn how to trade properly, build a proper trading plan, or perhaps you are just so greedy that you don’t have the patience to wait for your trading edge to appear in the market.Whatever the cause, trading too much can be a very quick route to blowing out your trading account.
- Risking too much: Risking more than you can mentally afford to lose at any one time, is a death-sentence in trading. Now, the key in that last sentence was “more than you can mentally afford to lose”, what do I mean by that? I mean, you need to really stop and look at your finances and determine how much money can you realistically afford to lose on any given trade. This means being honest with yourself, not ignoring things like credit card debt or student loan debt, etc. The more you risk per trade, the more emotional you will get once that trade is live.
- Worrying too much about money (what to risk, profits) before knowing how to trade: OK, most of you have a good idea of what is wrong with the above statements in Stan’s quote. But for those of you who don’t, let’s discuss. First off, you should not be worried about “how much to risk per trade” if you’re a “new trader”. It simply makes no sense. You must first learn how to trade from a reputable source, and then you will need to spend some time demo trading and ironing out a trading plan, before you even think about risking real money in the market.Traders who start risking money without having learned how to trade, inevitably lose all that money. Also, someone saying they are going to “make money trading to buy your course”, is like trying to fly a Boeing 747 before having gone to flight school; if you try it, you’re probably going to crash, and if you try trading before getting a trading education, your trading account is going to crash.
- Chasing the market after missing a signal: Often, traders will try chasing a market after missing a trade they were eyeing. What I mean is, they jump into the market after the trade has already taken off without them on-board. They do this because they feel regretful for not taking that trade and mad they didn’t listen to themselves. The problem here, is that doing this will get you in at a very bad price, requiring a wider stop loss and smaller position size, it’s simply less-likely the trade will work out for you if you chase the market like this.
- Not trusting yourself: Not trusting yourself or not believing in your trading abilities are big problems for many traders. Trading is something that, as mentioned earlier, is easy to over-complicate. People tend to think trading is ‘very hard’ or something that involves a lot of difficult math. But these beliefs simply are self-defeating ideas that contribute to low trading confidence in one’s self.It is a big mistake to not trust in your trading strategy and your trading plan, because these things were learned and developed (I hope) when you were not a trade and thus at your most objective and level-headed. So, the emotional you (when you’re in a trade) must rely on the plans and ideas you formulated when you were not emotional (trading plan, etc.), and you have to trust in that and not waver in your self-confidence.
- Paying too much attention to news and other external data: If you’ve followed me for a while now, you know I am not a fan of news-based trading. In fact, I think it’s downright counter-productive for a trader to pay too much attention to news events and how they may or may not impact a market. You can find whatever you want on the internet, and for a trader that can be very dangerous. If you want to disprove your trade idea, you will find evidence supporting that, if you want to prove it, you’ll find that evidence online too. At the end of the day, successful traders block out external variables and focus only on their trading edge.
- Not letting trades come to you: People tend to ‘force’ trades that aren’t there. They want to make money so bad, that they manifest ‘opportunities’ in the market where none exist. This is basically the same as over-trading, but the point here is that the best trades will tend to stand out like ‘sore thumbs’ on the charts. You should not have to look to hard, if you know what you’re looking for. If you find you must email people and ask other traders “is this a good trade”, it probably is not a good trade, at least not one worth risking money on.
- Feeling a sense of urgency to trade: Many traders become addicted to being in the market. They are addicted to the adrenaline and dopamine rush that they get when they enter a trade. Thus, when they are not in a trade, they tend to ‘crash’ and feel terrible, the only thing that gets them feeling ‘normal’ again, is another ‘injection’ of trading into their veins. Perhaps you are not quite THAT ^ addicted to trading, but you still feel some urgency to be in the market. You feel like if you aren’t in the market then you won’t make money, or you feel the more trades you make the more chances you have to make money. Well, I am here to tell you that all of these feelings, thoughts and actions are wrong and will only lead to you failing in the long-run.
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