Being a seasoned trader, have you ever made a mistake that cost you a fortune? Probably, yes! Working with a fluctuating market, mistakes like these happen all the time and to everyone. However, have you ever deep-dived and analyzed where you went wrong, we believe that there are always some unseen reasons to it, or the reasons that you already know but aren’t ready to accept or face it. In this article, we are discussing six major forex trading mistakes made by most of the seasoned traders.
1. Entering too late in the field
You are late! So What?
People often get stuck in their feelings, and one of these feelings is called FOMO, which stands for “Fear of Missing Out.” It’s a big deal to grasp because it can determine whether you’ll be a successful Forex trader or one who faces difficulties. And it’s not just beginners, even experienced traders can mess up by letting their emotions get in the way of making smart decisions.
You may be wondering why FOMO. It is because traders often fear that if they are late, they will miss good opportunities. Let’s say you are looking at the charts and spot a resistance line, back in your head you know this price will certainly cross the line and you do not want to lose that moment.
Meanwhile, you are checking other news, charts, and different indicators. Till the time you come back to the original currency, you find a sudden spike in the price, just as you predicted. Now, any trader would get emotionally anxious and ready to put in all their savings at this point to bag more earnings.
Instead of dwelling on missed opportunities, traders should focus on the potential opportunities ahead. This approach can help them make better decisions and avoid getting caught up in FOMO. Changing strategy at the last moment is a silly mistake that many traders make. It is okay to be late, you will eventually get the opportunity to succeed. The less emotional you are at work, the more money you can make.
2. Invest the money you can bear to lose
Let’s say you are investing $100 every day like 7 days a week and you are making steady returns. Investing a small amount is good because here you have nothing to lose. But, then one day you have a bright idea to invest $1000 or more. Now, what can happen in this scenario? One wrong move and your savings start reducing fast. However, some seasoned traders make these terrible mistakes.
Note: It is important to know that, when you are comfortable losing a particular amount, you become adjusted to trading without getting your emotions involved.
3. Stop Loss
There are some seasoned traders who forget to set a stop loss indicator which is a blunder. A “stop loss” is like a safety net for all types of traders, whether they trade for a day, a few days, or a long time. It’s like a point on a chart where you say, “If the price goes below this line, I want to stop trading.” Using a stop loss helps you make rational decisions instead of getting carried away by emotions like excitement and greed, which can cloud your judgment.
3. Using Too Many Indicators
Avoid using too many indicators as if you are getting free candies in a shop. Our research says that looking at some of the charts online, people tend to put a ton of indicators such as support, resistance, and Fibonacci charts, and to be honest with our readers, it can create confusion. Stick to one strategy and improvise it.
If you want to combine four trading strategies into one super strategy, the key is to prioritize the most important indicators. Stick to just one strategy and keep your trading chart simple and easy to understand. This helps prevent mistakes.
4. Trade with the trend
As we say ‘go with the flow’, traders say ‘trade with the trend’. It is simple, right? Purchase the currency when the market is going up and sell it when the price is dropping. However, some seasoned traders just overcomplicate things and fail to understand the uptrend and downtrend of the charts. If you stick to ‘only’ uptrend and ‘only’ downtrend, it will restrict your growth. It is good to keep it simple.
You may be curious about what uptrends and downtrends mean. Let me give you a quick explanation.
Uptrend describes the flow of price in an upward direction. Traders usually use Exponential Moving Average lengths such as 10-day, 50-day and 200-day. The analysis says that if the length is 200-day EMA, it is an uptrend and if it is below the length it is a downtrend.
5. Lack of record-keeping
Many traders keep focusing on earning day-in and day-out. Even seasoned traders overlook the record-keeping stage. Focusing on earning is good, but how can you evaluate your growth? Ever think about it? Keeping records always helps in improvement.
Analyzing your past trades, look at what things you did right and what could be done better. Make a separate document for yourself, and add images or screenshots whichever works well for you. Write down why you wanted to enter the trade, when you are going in and when you are planning to exit.
It will help you define your plan well; in case you want to change platforms, it will guide you much better. On top of that, you can be confident enough to follow your own plan.
Write down the emotions around why are you entering this particular trade and what are you thinking while you exited.
In this blog, we discussed six major issues connected with forex trading, especially with seasoned traders. We also discussed a set of things you can take on, based on their mistakes. It might be possible that you will not succeed in your first attempt but you will definitely make it the second time.
It is really hard to register where you went wrong but if you are curious and want to improve, you definitely will. It will consciously help you make more money and room for improvement. Yes, experience is important but it too gets outdated if you are not updated. Learning from other traders’ mistakes is better than making the same mistakes again and again.