Even if trading Forex may seem easy and as a trader, you get informed and you follow every recommended step, there are some common mistakes and traps that give troubles to many traders at some point in their career. Let’s see which are the most frequent problems and how to avoid them.
Over-trading is the first mistake because of which many traders don’t succeed to make money in Forex. They trade way too much, especially under the excitement of trading simulators on demo accounts. They often do very well on demo accounts, but when they start trading real money, things change. This happens because in simulations there is no emotion involved, but when your real money is on the line, emotion is the first destroyer of success. Trading without a plan or without setting an edge causes you to get very high transaction costs and you will lose money faster if you just gamble in the market, without knowing exactly what you are looking for.
No trading plan and discipline are another reasons why traders fail to make money. These seem to be the most frequent mistakes made by traders, since most of them say that they will create the plan later or after they start making the first money or they just think that a plan is simply useless. The result is that you will be more likely to act emotionally and to gamble in the market.
Too much analysis can affect you emotionally, even if the tendency is to make more and more research. There isn’t necessarily to spend hours analyzing all Forex news reports and indicators, because in the end, all the variables that affect a market’s price movements are shown in the price action on a price chart.
Gambling and trading real money too soon are due to the urge to jump into the market to make profits from the beginning. But it is recommended to use a demo account for a period of 3 to 6 months and only after being successful in these simulations, you should trade real money. In the end, be sure you are not just gambling your money, so make a plan, have a journal and set an edge to keep in your mind.
Incorrect money and risk management is another cause of traders losses. Most of them ignore the fact that they can lose on any trade, so they risk too much money per trade. If only one over-leveraged trade goes against you, it will set off a chain of emotional errors that will affect your trading account a lot faster than you think.
No matter if you are a beginner or a professional on Forex trading, these traps can affect anyone and you must be very careful in your decisions and do not act emotionally.