Ever hear of over-trading in the Forex market? It's definitely a real, and this article will help you understand why you're doing it, and how you can fix it.
1.Excitement
You have done all the necessary checks on your system and today is your first trade. Adrenaline is flowing and all of a sudden the market spikes and the 3 ema crosses the 13 ema. You place your trade as it is doing so. You forget that your system relies on your bars being closed before you make the trade and the next thing you know, the market turns against you and you are short now! This trading thing is exciting isn’t it? At the end of the day, you have made 5 trades to my 1 trade.It has cost me $30 and it has cost you $150 for the same trade.If you think you are an action junkie, you should learn to take a breath before taking the trade. Trading should not be an exciting hobby but a money making opportunity. If you are not making money trading Forex, you are gambling and many a gambler has lost in this market because of indiscipline and over excitement.
2.Trading According to Your Past
It is a common theme with even experienced Forex traders that the first thing we look at when we open our Forex trading platforms is the profit and loss section. We had a goal for $1000 this week and we have a net loss of $500 .So we decide we are going to make $1500 today to recoup our previous loses.
“I can’t believe I have lost that much money? ” The next thing you know, we have set up a revenge trade to show the world that we are the best traders. Most of the time we don’t even follow forex money management rules and instead trade 3 lots instead of the usual 1.
The trader is panicking and this type of Forex trading only leads to worse loses. This is not a strange phenomenon. Forex brokers are used to seeing a trader trade 1 lot for 1 week then move on to 3 lots in a span of 1 hour.A trader needs to understand that there shall be bad days for even the best Forex trading signal. Most Forex traders will tell you that they failed in trading because a certain trading system does not work. However, most have failed because of this one reason alone.
Learn how to trade the market not your account size and trying to cover loses.
3.Scalping in Forex
Unless you are a floor trader and have nerves of steel ,forget about scalping the Forex market. I have yet to see any Forex scalper who has lasted 3 months. Most scalpers fall in the group of traders who have made a few loses with their best forex system and have found an easy way to make up their loses. Their idea is that if they can only make 10 pips in 10 trades they will make the $1000 needed to cover their loses.
Forex money management principles are very easy. Your winners should be larger in value than your loses .If you are consistently losing 10 pips and then exiting a trade that would have made you 50 pips at 10 pips, you are going to stop trading sooner than you think. The caveat being that you have a system that has 90% winning trades in which case, you are in the wrong Forex blog.
4.Forex Trader Overconfidence
There is a reason why younger people are better traders than older ones. Somehow the younger you are ,the less of an ego you have.Leaving your ego behind is the mantra for anyone who wishes to be a trend trader. It is not you who is deciding the the gbpjpy is going up, it is the market. After one has made a trade, good or bad, you should leave that ego at the doorstep.Exit bad trades and hold on to good trades and exit when your goal is reached. I have told so many people that I only go for 50 pips a week. There is a reason for that. I discovered that when I go for more, greed sets in and I want to go for 200 pips.
As a trader, one should learn to take make each Forex trade mutually exclusive of any other trade he/she has ever taken. Forget about the huge 100 pips win you made yesterday and the 100 pips loss you made yesterday. Just follow your forex trading plan and let the market decide for you.
If you find yourself in a position where you always lose money in one currency pair but consistently are profitable with another, don’t fight it. Some time back I discovered that I was always losing trading the yen and always reading other peoples opinion trading the euro currency. However my win rate with gbpjpy, usdchf and gbpusd was good. So these days I never look at usdjpy or eurusd. I really wouldn’t care if the jpy went up 1000 pips today and I only made 10 pips on my pairs.
Be careful not to let your ego get deflated either. Just because the market went against you today, doesn’t mean it will do the same today. In fact it is more likely to go your way with other traders who have lost hope sitting by the wayside like you.Good luck is not a good Forex trading strategy either. Take those good luck trades but don’t forget that even good luck becomes bad sometime.
5.Missing a Forex Trade
Missing a trade is not the end of the world. I missed a whole week Forex trading .I was annoyed but at the same time, why should I care. I might have put the wrong trade and lost instead. It is a common thing for Forex traders chasing the market. You have come to your computer and found that the pound has already moved 20 pips in one direction and you decide you can see a huge move and enter willy nilly. Instead of waiting for retracements , you just place your trade. Normally the market goes back those 20 pips and you are in the red and you close your trade. Then it starts moving again and in the space of 5 minutes you have placed 5 trades.
Wait for your trade, if you miss the initial move, use the guppy, it will tell you when the market has retraced enough for you to enter the market.
