Mistakes happen, we all do them and we make mistakes when we do pretty much anything in life, even things that we have been doing for years and years. So it is obvious that we will also make mistakes when it comes to our trading, that is always going to happen, what is important though is how we earn from them and how we develop after making those mistakes. Some are pretty minor and don’t have a huge effect, some may even benefit us if we are lucky, but some mistakes will hold us back, they will prevent us from being successful and profitable and if we continue to make them, we will consistently lose out and won’t be able to become a successful trader. It is those mistakes that we will be looking at in this article, mistakes that many traders do that can hold their forex trading success back.
It can be very easy to fall into the trap of taking shortcuts, when we say shortcuts we are referring to the rules and the methods that you use to place trades, your trading plan will have some rules on it, these rules will dictate how and when you place your trades. These can be pretty small shortcuts, like not waiting for additional confirmation, or they can be pretty significant ones like trying to speed up the process by not placing a stop loss with a trade. While they may not seem big, those little things like not placing a stop loss could potentially end up causing some quite considerable losses which will, in turn, put your overall trading results back quite a bit. It is important that you try to avoid these shortcuts, some may work, but when they don’t they can have big effects. Ensure that you stick to your rules and that you do them fully, not doing just half and hoping things are ok, that extra minute that you save is not worth the additional risks involved.
Not Following A Plan
The plan is there for a reason, it is called a plan because it is what you are meant to be following. Yet we see so many people look at their plan and then only follow a few of the things on it. Trading plans should be pretty diverse, they will include the rules for placing trades as well as the risk management plans that are there to help protect our account. Due to this, it is important that you follow them, as soon as you deviate you are placing bad trades and you are reducing the effectiveness and the consistency of your trading. If you have a plan you need to stick to it. The more that you go against it, the more losses and larger effects those losses will have on your account. Stick to your plan at all times.
A lot of people don’t seem to stick to their risk management plans, at least not entirely. Your plan will have your risk to reward ratio which will dictate things like your stop loss distance. It will also include things like the trade sizes that you should be using as well as the frequency of your trades. Yet so many go against this, the normal reasons for going against it and increasing things like trade sizes and frequency are a recent loss that they want to win back or overconfidence, things are going very well and so they believe that they can predict the markets. If you ever feel like this, then take a step back, take a break and then come back when these sorts of emotions are not with you. Stick to your risk management plan, you set it up for a reason, it works, so every time you break it you are risking money and potentially your entire account.
Something that we are all probably guilty of, we love to trade, but sometimes it is better not to and when you are tired, that can be one of those reasons. When we are tired we do not have the same concentration levels, we are far more easily distracted and we are far more likely to make mistakes. Yet we love trading so much or feel that we need to trade that sometimes it doesn’t matter how tired we are, we will still trade. This is where a lot of mistakes will be made, things missed out and potential losses gained. If you’re feeling tired, or that you cannot concentrate fully, then you should try and avoid trading as a whole, including analysing the markets and especially placing any trade.
Distractions are horrible things when it comes to trading, pretty much anything can be a distraction. When you set up your trading officer room, you should have ensured that a lot of the things that could cause you distractions were removed. Things like a TV, games consoles, things like hats, things that can take your attention away from your trading. Ensure that others know that you are trading and that you do not wish to be disturbed. Distractions can very easily cause you to miss things or to place trades incorrectly, so it is vital that you eliminate as many as you can.
Trading With Emotions
Emotions are wonderful things, they can make us feel amazing but at the same time, they can make us feel pretty rotten. One thing that we want to avoid is trading while our emotions are pretty high. They can cause us to want to do things that go against our trading strategy, things like greed and overconfidence can make us trade large or more often, while things like anxiety and fear can make us not want to trade at all. When we have our emotions high or you can feel something building up then it is important that you take a break, step away, clear your mind and come back when those emotions have died down.
Those are just some of the mistakes that people make when they are trading, some of them may seem pretty small but the consequences that they can have can be pretty big. If you are in any situation, then take a step back and see what you can do to try and rectify things. It’s not the end of the world but what is important is that you are able to recognise them and then do what you can to rectify them.