If you are a Forex trader then I am sure that you have made a couple of your own trading mistakes throughout your career, you have learned from those and it has made you a better trader. I am going to share with you 22 common trading mistakes that hopefully you can learn from and make you a better trader. These 22 trading mistakes are from what I have learned from trading and what I believe to be costing many traders money. Now let’s get into it!
1. Trying to find the “holy grail”
I want to start with this trading mistake because this is the most common mistake every new trader makes. They go from one trading strategy to another looking for the “holy grail” of trading, yet little do they know there is no such thing. All they do is waste their time and money looking for it. There is no trading strategy that is going to win every trade and the sooner that this is realized the better off you will be. The best plan is to find a strategy that fits you and master it. Whatever this trading strategy may be, whether it is price action or something else, you need to study the heck out of it and learn everything you can about it. Once you finally settle on a trading strategy and master it, you will start making money.
2. Entering a trade at market price
NEVER enter a trade at market price; this will cost you many trades and a lot of money. Every trade you want to take should be entered with either a buy or sell stop. You can check out this article for more information on buy and sell stops. The reason why you should never enter at market price is because it doesn't give the time to think through the trade and more often then not the trade goes against you. To be a smart trader you need to never enter a trade at market price.
3. Not using a stop loss and/or moving your stop loss
This is another very common trading mistake that many traders make and it absolutely kills their bankroll. That is not using a stop loss or moving your stop loss in hope the trade will eventually go your way. Not placing a stop loss is one of the biggest no-no’s in Forex trading, a stop loss is like a safety net and without that you can lose a significant amount of money on any trade. One 100 pip move against you and your whole account could be wiped out. Placing a stop loss on every trade is something you need to do every single trade, there are no exceptions to this rule.
Another no-no is moving your stop loss when the price gets close to it, this often happens with beginners when they think that if they give the trade some more room that the prices will eventually go their way. Except 99% of the time it never does and you lose way more money than you should have. Basically, it is very important to correctly use the stop loss when trading and if it isn’t it can cost you a lot of money.
4. Trading on too low of time frames
Many traders want to trade on the lower time frames such as the 30 min, 15 min and even 5 min charts because it is a lot more exciting and more trade setups form. The only problem with that is the trade setups that form on these low time frames are very weak, they are usually give false signals which makes it very tricky to trade successfully. Even though the 4H, daily and weekly charts may not provide as much excitement they will provide more accurate setups and a better chance at making money trading.
5. Trading off of your phone
Now I’m not saying that you can’t use your phone to trade but be very careful if you decide to do it. Trading off of your phone is very difficult because you don’t have everything you normally would have if you were using a computer. The charts are smaller, the charts are often not New York close, not all of the currency pairs are listed and the biggest reason is because it is unnecessary to trade off of your phone. You don’t need to be looking at a chart 24/7, it will do you some good to take a break from the charts. Checking your current trades with your phone is reasonable but making trades is not.
6. Trading on charts that aren’t New York close
Not trading with New York close charts is a big trading mistake that many beginner traders make, they usually don’t even know that different brokers have charts that are different. The reason why you want to trade with New York close charts is because it is what most traders use and also because it provides the most accurate setups to trade. Not all brokers offer New York close charts so it is important that you find one that does. A good broker is Pepper stone and they offer the correct charts. If you already are using a broker that doesn't offer New York close charts don’t freak out, you can stay with your broker but use New York close charts to find your trade setups then your original broker to enter the trade. This is what I do actually and it works out fine.
7. Using a robot, or mechanical system to trade for you
This is something that is very popular with new traders since they think that they don’t have to know anything about Forex to make money trading, except that is wrong. All they are really going to do is lose money. Using a robot to trade for you one of the worst decisions you can make as a trader. You do not want a robot controlling when you enter and exit trades. Some robots or auto traders guarantee that they will make you money but don’t believe it, they will only lose all of your money in the long run. Don’t fall into the trap of thinking that having a robot trade for you is a good idea. Take my advice and stay as far away as you can from these auto traders. It will make you a better trader by doing so.
8. Not setting take profit levels
Setting take profit levels is something that you should do on every single trade you ever take, if you don’t you will never know when to exit a trade. Take profit levels help you manage your trade better and let you know when to move your stop loss. It helps you plan your trade and make it so you maximize the profit of every single trade. Setting take profit levels are extremely important to having a successful trade.
9. Setting unrealistic trading goals
Many people think that when they begin trading Forex that the money will begin to roll in and and soon they will be living on the beach somewhere. Only problem with that is trading successfully takes a lot of time and hard work, without those two things you will not become a successful trader. Also you will not making a ton of money because on each trade you only risk 2% of your account so unless you have a million dollar account you won’t be making much on each trade. And even if you had that much money in your account you still have to put in the time and work to become successful. Make sure that you set reasonable goals for yourself when you start out, if you don’t you will become very disappointed in your results.
10. Over trading
Over trading is something that is very easy to do because sometimes trading Forex can be boring. You aren’t always going to be in a trade and you shouldn’t be looking for any sort of setup to enter the trade. If you are trading Forex because of the adrenaline rush you get when watching a trade then you need to make sure that you keep your emotions in check. Also don’t take just any trade setup that forms, only take the best ones. If you are smart and disciplined then you won’t over trade.
11. Entering trades on Fridays
I go more in-depth about this trading mistake here but I wanted to mention this one on this list. Now I am not saying that you can’t enter a longer term trade on Friday, such as a weekly or monthly trade, but for the most part it is best to stay away from trading on Fridays. The reason for this is because a lot of things can happen over a span of two days over the weekend and very often it goes against you and hits your stop loss. Also the spreads are higher for most brokers on Fridays which can hurt your profits. Overall just be careful when trading on Fridays.
12. Trading live before you are ready
Trading successfully for a month on a demo account does not mean that you are ready to start trading with real money. It is a good start but not enough to prove that you can trade live profitably. You have to prove that you can win trades consistently and make money. You need to learn the basics and have a great understanding of how the market works before you trade live. Now it may take some people longer than other to be ready to trade live, it all depends on how fast you learn but you still have to show the ability to win consistently. Once you can do that you can begin thinking about trading live.
13. Trading a demo account for too long
Now like I was just talking about, it is very important that you can win trades consistently and have a good understanding of the Forex market but you also need to trade live to get the real experience. Yes trading a demo account is great for practicing and mastering a trading strategy but after you have that down you need to move onto a real account. There are a lot of different emotions that you feel when you are trading a demo account compared to a live account, those emotions are what you need to be able to control to be successful. The only way to get to feel these emotions is to trade live, you don’t have to start with a lot of money but any money will get you started with a real account.
14. Risking too much per trade
Every trade that you take should be risking no more than 4% and ideally around 2%, now that doesn’t seem like very much but if you are risking 10% of your account on every trade and you lose a couple trades a big chunk of your account will be gone. Also trading Forex is not a get rich quick scheme, it is about building up your account over time. People think that by only risking 2% that your profit will be too small, but really if you hit a big trade you could increase your account by up to 10%. Can you imagine if you had a $100,000 account? That would be like hitting the jackpot. So remember keep the risk low and hit the big trades.
15. Not trading at support and resistance zones
This is arguably the most important thing to look at before entering a trade because it provides an area where there is the best chance to predict what the market is going to do. If you don’t trade at support and resistance zone then you are pretty much trading in no-man’s land and that is not where you want to be trading. Identifying support and resistance zones are easy and it is also easy to trade them. Just wait for price to approach and then look for a trade setup to form on the support and resistance zone. It is very simple and it will make a much better trader.
16. Trading when you are mad, upset, drunk, etc.
You need to be in the right mindset to be able to think clearly and make smart trading decisions. If you lose a couple trades in a row and you are feeling angry and wanting to win all of it back in a trade, then you should turn off your computer and come back later. Trading out of anger is a terrible way to trade and will cost you money, also if you are intoxicated while trading it is probably better if wait to trade sober. One mistake could cost you your whole trading account. By simply adding an extra zero to the amount of units could cost you big time. So before you trade make sure that your mind is right.
17. Trading the news
Trading the news is something that a low of traders do and for, that is wasting my time and often times my money by doing so. The reason for this is because all of the information you need is on the charts, you don’t need any more information to trade. By using the news to trade you are just making it harder for you to trade successfully because it often times gives you too much information that is useless. Most of the news is just opinions and doesn’t matter one bit, if you stick to reading the charts instead of the news you will save yourself time and money.
18. Miscalculating the position size
Calculating the correct position size for every trade is crucial for risking the right amount of money. This can often be difficult so the best way to make sure you don’t make this trading mistake is to use a position size calculator. What these do is calculate the correct amount of lots you should use for the trade. It will ask you your account balance, % being risked, and your stop loss in pips to calculate the right amount of lots for your trade.
19. Not having discipline or patience
Trading Forex isn’t all about your trading strategies, a huge part is the psychological aspect of trading. This is often overlooked when learning to trade and that is why many new traders fail, they don’t have the right mindset to trade. Arguably the two most important things to have as a trader is discipline and patience. Having both of these qualities will allow you to wait for the right trade setup and pounce on it when you see it. You won’t waste your time/money on trading crappy trade setups, you will wait for just the right setup. This can be very hard to do and that is why it is important to train your mind to do these things. This is one of the more common trading mistakes that are made.
20. Using a broker with large spreads
By having a broker with large spreads you are cheating yourself out of money that could be going into your account. It would be best to look around and find the broker with the best spreads. I personally use Oanda and there spreads are great! I would suggest just making sure that you aren't getting screwed over by your broker, every pip counts.
21. Trading currency pairs that are correlated
This is a trading mistake that many traders don’t even realize they are making, this happens when you are in two trades with the same currency. For example you are in a trade with the USD/CAD and the USD/JPY, this is not good because since both pairs have the USD in it they will generally move in the same direction. This essentially doubles your risk without you even knowing about. You need to be careful when taking multiple trades at a time to make sure that you don’t make this trading mistake.
22. Thinking trading Forex is easy
For some reason many people think that trading Forex is easy and that it is something that anyone could be successful at. That is the farthest from the truth, trading Forex takes a significant amount of time to learn and even more time to master. You need to put in the time to study and understand everything about Forex then you have to find the right trading strategy that works for you. It takes a lot of time and work to become a successful Forex trader but many people seem to think differently. This is a very common mistake that a lot of people make when they first start trading.
Conclusion
That is a wrap for the 22 trading mistakes and hopefully you have taken some notes to remember to not make these mistakes when trading. Please leave a comment below telling what your number one trading mistake is and why. I would love to hear from everyone! Also if you feel like this would help a friend that you know is struggling trading or anyone that could benefit from this please share it with them. It would be much appreciated. Thanks for reading through this long post and I hope you enjoyed it.
Source - tradingwithpriceaction.com
