We often hear about the habits of successful Forex traders and study what these individuals do on a daily basis. Have you ever wondered what they don’t do? Here, we’ll take a look at some of the keys to success from the perspective of what successful traders actually don’t do.
#1: Forget to Set a Stop-Loss
Using a stop-loss is one of the best risk-management tools in the arsenal of a forex trader. It helps limit your losses so that you don’t lose too much money if things don’t go the way you had hoped. Some traders might choose not to use a stop-loss because they are confident about the direction that the market will go, however, nothing is ever certain when it comes to the foreign exchange market. This is why the best traders set a stop-loss and take other measures to limit their risks.
#2: Fail to Learn Something New
Those that have been trading for a while sometimes feel so confident that they think they know everything they need to know about trading already. The truth is that there is always more information out there about strategies and other insightful information that can add to one’s overall knowledge. Successful traders invest time into their education, even after becoming more established.
#3: Worry About Other Opinions
There’s no “right” way to trade forex. With so many strategies, trading plans, and different ways of doing it, it really comes down to what works for the individual. Successful traders find a plan that works, perfect their strategy, and stick with it instead of chasing trends and trying different suggestions because someone else says they know better.
#4: Become Overly Emotional
Emotions can run high when money is on the line, especially with the rollercoaster ride of ups and downs that come with forex trading. Feelings of grief, anger, disappointment, greed, excitement, overconfidence, and a whole host of other emotions can wreak havoc on the way that we trade. The best traders understand the psychology behind the way that these emotions interfere and have enough discipline to keep themselves calm and levelheaded or to take a break if things start to get too intense.
#5: Risk too Much
When we speak about risking too much, the amount can vary from person to person. Still, a good idea of how much you should risk on a single trade is around 1% – 5% if you listen to the experts. If you go risking 10% here, 20% there, and things go wrong, then you could quickly blow your balance. This is especially true for successful traders that have a large investment sitting in their account.
#6: Use too Much Leverage
The leverage you use is another matter that comes down to personal preference, and you also might be limited depending on the broker you’ve chosen. Traders should still be aware that using too much leverage can cause you to lose a lot of money at once, therefore, many professionals choose to stick with a leverage option of around 1:100 even if their broker offers options that are much higher.
#7: Set Unrealistic Expectations
One might assume that a forex trader has one goal and one goal only: to make money. However, a person really needs to focus on self-improvement once they start trading forex. It isn’t a good idea to only have one large goal or to set detailed goals about exactly how much money you will make within a certain timeframe. Successful traders set short-term and long-term goals and focus on bettering themselves so that they will make more money in the long run, rather than only thinking of dollar signs the whole way through.