1. Overtrading and engaging in too many trades at once
The most common mistake beginners and experienced traders make is getting involved in too many trades at once and over-trading. This is the main reason why 90% of traders lose money in the long term. It is important to have self-control and not engage in excessive trading. In most cases, there is no need to be involved in more than one trade at a time.
2. Analyzing charts and considering trading for too long
One common mistake traders make is spending too much time looking at charts, even when there are no clear signals to trade. This can lead to making impulsive trades that go against their trading strategy. To avoid this, it is important to have a trading plan that includes dedicated time away from the charts.
3. Using short time-frame charts to try to make trading decisions
Charts with a longer time frame is more important than those with a shorter time frame. This is because longer time frames provide more data and therefore, are more reliable. Trading with higher time frames may require more patience, but it can also provide more accurate signals and reduce stress.
4. Trading with real money before putting your skills to the test on a Demo Account
It’s essential to test your trading strategy and skills on a demo trading platform under real market conditions before determining whether or not it’s successful. This is key for those looking to learn how to trade effectively and profitably.
5. Spiraling into news distractions
It’s important to note that market movements may reflect trade or economic news before it’s officially announced and major players have already taken action based on their predictions. When the information is eventually released, the market may experience sudden movements in price known as a “whipsaw”, which can make it challenging to trade based on news alone.
6. Failing to recognize that each trade has a random expectation
It’s important to keep in mind that every trade a trader makes has a similar chance of resulting in a loss or a profit. Trading inherently has a random distribution of wins and losses.
7. A sense of urgency or desperation to trade
To succeed in trading, it is crucial to remain calm, composed, and not emotionally invested in the outcome of your trades. It is still recommended to have a secondary source of income and to exercise caution when investing a large portion of your money in the markets.
8. Waffling excessively, having little faith in your judgment, and adhering to them
When entering a trade, it’s important to let it play out and not make hasty decisions based on small price movements. To trade successfully, you must allow the market to take its course. This will help you avoid losing money and trading with stress.
9. Overemphasizing “money” and “reward” while undervaluing the process
To be successful in trading, focus on important aspects such as strategy, risk management, position size, and following your plan. It’s important to stick to your plan rather than constantly making adjustments.
10. Interfering with trades once they are Live
In most cases, the best course of action after entering a trade is to do nothing. However, to achieve long-term gains in the markets, it’s important to learn to let your trades play out and not make unnecessary adjustments.
11. Trying to catch a signal you missed and paying too much for it
Avoid entering the market after it has already made a significant move. Instead, it’s better to wait for the next opportunity and remember that the market will be open again tomorrow.
12. Not setting your per-trade risk allowance in advance
To avoid letting emotions cloud your judgment, it’s essential to limit the amount of money you can afford to lose on each trade. This will help you make rational decisions.
To avoid these mistakes, learn the basics of forex trading. Then, learn all the fundamentals, and there’s no doubt you’ll become a pro. Get started today!