10 mistakes to avoid in Forex trading
If you aim to become a successful and profitable forex trader, there are a number of seriously damaging mistakes that you’ll want to avoid. It should go without saying that you will make some mistakes when learning how to trade.
It’s simply unavoidable. This is not necessarily a bad thing, as mistakes allow you to learn and grow. The ten mistakes that you’ll read about below are among the most common and as such, tend to be the most damaging when not noted and corrected.
1. Entering into too many trades at once
If you’re entering into multiple trades at once, you’re likely over-trading. Each trade deserves your full attention to help ensure that it is profitable. Dividing your attention among multiple trades will only decrease the odds of each of those trades resulting in profit. Less is more when trading FX and the sooner you realize this, the better off you’ll be.
2. Devoting too much time to analysis and trade planning
While trade analysis is necessary, it can take up too much of your time. You may even find that you’re spending way too much time in the planning phase and very little actually trading. There will only be a number of optimal entry points each day. Don’t miss out on too many of these by being locked into exorbitant trade planning.
3. Placing too much focus on short-term charts
Trading too frequently on the short-term charts can lead to over-trading and over-trading can lead to fast losses and a gambling-like approach to forex trading. Additional, critical data comes from higher time-frame charts such as those seen within the XM platform, and these charts tend to be more important than lower time-frame charts. With higher time frames, you’ll receive more reliable signals and a reduction in your stress levels.
4. Bypassing the opportunity to trade on a demo account
One should never trade with real money before trading with mock funds using a demo account. Even if you’ve done your homework and are certain that you know how to trade, you need to see trades in action within a platform. XM offers free, unlimited demo accounts to all. Visit them now to create a practice account and avoid this terrible mistake.
5. Trading solely based upon the news
Don’t assume that you know which way the market will move based solely on the news. Far too many traders have experienced serious losses due to making this mistake. You absolutely must carry out technical analysis with fundamental analysis on each and every trade.
6. Thinking that past “wins” guarantee current profits
So, you last ten trades using the same parameters and selections were all winners. Congrats! Now, don’t make the mistake of assuming that if you open yet another using the same selections that it too will be profitable. Yes, trading with the trend can result in a round of easy profits, but each trend has to end at some point. Always remember this.
7. Trading out of desperation
If you’re feeling a sense of urgency to trade, then you’re likely better off walking away. Terrible decisions come from trading during desperate times. Take a break, collect yourself, and make a new plan before trading again.
8. Failing to follow the process
Although each trader may use their own strategies, there are general steps that all traders should follow when trading. Skipping past some of these (particularly analysis) can result in losses. Follow the process laid out by the successful traders who have come before you if you want to have the best odds of being successful.
9. Making unplanned changes to live trades
Just because trading platforms such as the MT4 and MT5 platform provided by XM allows for changes does not mean that you should make them. No doubt, strong emotions can come from watching price movement during a live trade. Acting on these can cause problems though, so unless you are 110% positive that you’re doing the right thing, leave your open trades alone!
10. Entering the market after an optimal entry point has passed
Missed an optimal entry point? Move on. Never assume that you can jump into a trade soon after a missed entry using the same expected price movement and profit. Yes, it can sting to miss out on a great entry point, but others will come along.
What truly sets the best forex traders apart from the worst is that the best are those who have made mistakes such as the ones mentioned above, but took action to correct them going forward. Those who do not do this may end up making the same mistakes over and over again, eventually draining their trading account.
Select a top-tier broker such as XM, establish a solid plan for trading, and make corrections when necessary. If you do these things, you can expect to come out on top.