Traders are common people. And many of them make common mistakes. Let’s find out the most typical mistakes of Forex speculators in order to avoid them and become better traders 😉
1. Trade at the opening of the market
In the first minutes of trading, the market usually jerks wildly or immediately flies off somewhere (up or down). Experienced market participants sometimes try to use their knowledge to predict the first minutes of market movement. But for a novice trader, this possibility is excluded – emotions will definitely let you down.
2. Premature profit withdrawal
You buy the currency pair, it goes up, after a couple of days you see at how much money you’ve made and happily close the position. And this movement, as it will become clear later, has appeared to be only the beginning of a powerful uptrend, so if you were not in a hurry, you could earn 10 times more. Use Take Profit only in exceptional cases – when there is a clear level of resistance. You can practice it at no charge on a Demo account.
3. Adding to a losing position
And this is the opposite example: you buy and the price goes down. But you claim that it will grow anyway and buy even more. And the price goes further down, simply doubling your losses. Remember: you can only add to a profitable position.
4. Closing positions starting with the best one
When you have several purchases and the price starts to go down, you often instinctively try to take profits first and only then close the unprofitable position (or leave it until the execution of the stop loss order). This is a wrong tactic: if the whole market goes down, then most likely the rest positions will fall faster and after all, you have a loss on them already; therefore, this position must be closed first. So do not rush to close a profitable position.
5. Desire for revenge
Typical trouble of a beginner: a loss-making position has just been closed – and he again rushes into the market with excitement to get back lost money. The result will be only a new loss – so do not return to the market after catching the loss. Get some rest.
6. The presence of particularly preferred positions
Approach your positions wisely: get rid of special preferences, for example, to those positions where you bought at the very bottom – usually, such transactions are the subject of particular pride of each trader. This illusion of a successful transaction may bring you to a great loss. Get real!
7. Trading on the principle of “bought forever”
You worked for a relatively short period, bought a pair, and it suddenly went up sharply. Here you say to yourself “aha, I caught the beginning of a multi-year uptrend” – and leave this position “forever.” But this does not happen: either you, in principle, move to much longer evaluation periods, or you follow your standard rules with your usual short period. Do not marry your position!
8. Closing a profitable strategic position on the first day
On the contrary, if you do not trade within the day, then, having opened any serious position, do not close it on the first day under any conditions. Even if the price flew up very far – be patient, tomorrow it will be even higher.
You can not trade if you are not sure of your previous assessment of the situation. Having said to yourself “I can’t shake the feeling,” you should quickly close all your positions and re-analyze the situation. Or take a walk. It helps from any ailments – try it!
Emotions are an integral part of trading. They bring healthy excitement and competitive spirit. But emotions have another side – the trader falls into euphoria at profit, and get discouraged at losses.
The legendary Jesse Livermore wrote: “The human side of every person is the greatest enemy of the average investor or speculator.” Psychological swing interferes making the right decisions. Fear and greed lead to mistakes.
Tip: Set yourself goals for the day and work under a well-developed strategy. They allow to reduce the level of emotions in trading and minimize the number of rash actions.