When I first started out trading 8 years ago, I made a lot of mistakes that even experienced traders grapple with.
Here are 6 common mistakes that both new and experienced traders make:
Trading forex with emotions
Fear is one of the two most frequently talked about emotions in trading. Fear manifests itself in a number of ways in trading and can be the cause of many trading mistakes.
a) Fear of making a loss leads traders to delay the realization of a loss, with the hope of turning it around, which leads to a greater loss later on.
b) Fear of not realizing profits in a winning trade leads traders to close their positions too early.
trading forex with greed
Greed is supposed to be good, but when we look at the hard facts, greed often causes a number of impulsive trading decisions that should be avoided.
Traders who are influenced by greed often don’t adhere to sound risk and money management principles. Greed also reinforces the gambling mindset which describes trading without set rules and based on impulsive decisions.
trading forex based on hope and luck
Hope, fear and greed often come hand in hand. Traders who are in a losing position often show signs of hope, when they delay the realization of a loss and give a trade more room to breathe.
Another example of hope is when traders try to make up for past losses and then enter a trade with a position that is too big and not according to their rules.
4. Excitement / Anxiety
Trading forex causes anxiety and excitement
When you are overly anxious during a trade, it is often a sign that your position is too big, you broke your rules or that you shouldn’t be in that trade.
Keeping track of your anxiety level and asking yourself why you feel anxious or excited can often help you get out of trades where you shouldn’t be in the first place.
trading forex because you are bored
Traders who are bored also often lack focus. A sign that you lack focus is when you find yourself going through the same instruments and time-frames over and over again without really knowing what you are looking for.
Also, when you miss trade entries, because you weren’t paying attention, browsing the internet or doing something else is a sign that your focus is not where it should be.
Get your priorities straight and when you are trading, don’t engage in any other activities.
When traders miss trades, violate their rules and lose money, take too much risk and lose too much money, or see what they should have done, frustration starts to take over. Frustration then reinforces all the bad negative behavior patterns that a trader struggles with and intensifies the problems a trader has.