When Forex Trading Avoid These Mistakes

These are mistakes that all traders make at some point, no matter how experienced they may be. It’s all about having a forex trading plan and a trading discipline.

The Right Time To Exit

The most common mistake in forex trading is taking profits on your winning trades too soon and conversely hanging on to losing trades for too long.

You can’t lose money taking profits? No, of course you can’t but remember you are bound to have losing positions and the key is to make sure your winning trades run for long enough to keep your overall account in profit.

You must follow a trading plan with stop-loss orders and you must stick to it rigidly to accept small losses.

Trading Without A Plan

The best way to avoid forex trading mistakes is to trade with a clear plan.

Opening a forex trade without an exit strategy is an invitation to losses. If the market moves against you, will you be able to exit the trade with the minimum loss? Conversely, when should you take your profits? Without a clear exit strategy in your trading plan you will be trying to act on raw emotion and are unlikely to make the right decisions.

Avoid trading spontaneously, do your research in advance and you will be less likely to be swayed by sudden movements.

Trading Without A Stop Loss

Forex trading without a stop loss strategy is a sure fire way to fail. Having a good stop loss strategy is probably the single most important tool for the forex trader.

As a forex trader your are going to make losing trades. There is no way to avoid them altogether. What you must do is minimise those losses to be as small as possible.

Plan your forex trades in advance and start with an expectation that you you may lose and use a stop loss order to manage your exit strategy.

Moving Your Stop Loss In The Wrong Direction

Moving your stop loss down on a losing trade is almost as bad as having no stop loss at all. In fact you might as well not have one. You must learn to take relatively small losses if you are to succeed overall.

Moving your stop loss up in favour of a winning position is OK as this allows you to lock in your profits.

Don’t Overtrade

Overtrading your forex positions is a common forex trading mistake.

Trading too often suggests that there is always something worth trading. Remember, every time you trade you expose yourself to market risk. Keep disciplined and only trade when good opportunities arise and are part of your overall trading plan.

Trading too many positions at once eats into your margin collateral and reduces your ability to cope should the market move against you.

Also, avoid duplicating a trade. A short EUR/USD position taken with a long EUR/JPY position equates to a long USD/JPY position.

Conclusion

Avoid these common forex trading mistakes and make a plan that fully utilises stop loss positions. Don't overtrade and take on more than you can easily handle.