All it requires is as low as a computer, a good internet connection, a broking account, and a few hundred dollars. Some of these forex mistakes are as simple as trading without a stop loss or adding to a losing trade. Forex mistakes that traders should avoid in day trading are blind following mechanical systems, testing systems only a couple of years in the past instead of several decades, huge risk-taking, and overtrading.

Thus, you should consider all the scenarios before you start trading. Below we have listed the top 10 reasons why forex trading goes wrong! The two main things to keep an eye on in trading is the winning rate and the risk to reward ratio. The winning rate is the number of trades that you have won stated in a percentage.

13 Common Forex Trading Mistakes to Avoid in

For example, if you have taken trades in total and if out of the 70 have proved winning, then the winning rate is 70 percent. On the other hand, the reward to risk ratio is how much reward you get in terms of the risk you take. It also means how much you lose on average.

A reward to risk ratio of more than 1 is good as it means you are at least winning more than you are losing and can cover the commission or fees you have to pay over your trades. You can still have profitable trades if your winning rate is lower, but the reward to risk is higher. You can mix and match strategies and decide your preferred settings. A stop loss is a must!

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Note that a stop loss is a must to save yourself from the misery of huge losses. If a price goes in the opposite direction, a stop loss helps you save yourself from the downside risk.

Many times traders keep on adding positions to average their trades, which can be one of the biggest forex mistakes you can make. If the price moves in the opposite direction, you should better sell your positions. The forex market is volatile, and the currency pairs can go much in the opposite direction than you can think of. The best thing you can do here is decide a proper trade size and place a stop loss. A stop-loss would stop you from losing more. Deciding how much your existing forex account worths and how much you should risk is an essential part of avoiding a big forex mistake.

Losing is a part of trading, but how much you can afford to lose weighs more. You are advised to set a particular percentage that you can lose in a single day. Losing can be an addiction as it comes with a poison called hope.

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So, be a disciplined trader and trade strictly within your limits. Trading has to be done without emotions. With the entry of emotions, logic takes a backseat. Many a time, even if the risk management strategy is in place, you tend to ignore it for winning your losing trades back. The chances of getting hopelessly hopeful are high when you want to convert a losing streak into a winning one.

Just like profits, forex mistakes are keen to compound. More greed can result in you taking more margin trades than you can afford, and that also means you would not be able to afford it if you lose. The best way you can make your forex trading going in the opposite direction is to stick to the percentage rate you can afford to lose. For example, if you can afford to lose 1.

Economic events across the globe affect the forex market. Thus, when you are trading currencies, try to avoid anticipating the moves. The currency pairs are susceptible to global news, and your wrong prediction can make you lose your hard-earned money. Instead, wait till the news is out and then trade accordingly. Forex prices tend to move in both directions, very rapidly and sharply. As a result, you being in the wrong trade has higher possibilities, and within seconds, you would have a big losing trade.

Also, another problem here is liquidity issues. When news breaks, the bid and ask spread the highest rate to buy and the lowest rate to sell is big, and it can result in you not being able to exit a trade on time. However, there are a bunch of strategies that you can use instead of predicting the news.

2. You only trade on the 1-hour time frame.

This article will give an overview of the most common mistakes made by traders as noticed by Admiral Markets. Although leverage provides an opportunity to trade more money on the market keeping risk capital at the minimum, which leads to a massive gain, it can also amplify the potential to incur significant losses, if the market starts moving in an unintended direction.

Over trading can lead to poorly executed trades and gives less time to react, especially when trading losses are piling up. There are a lot of companies earning money by selling such software, but in reality they would never give their secrets away, if the software really worked. Hence trying to pick the tops and bottoms or trading short-term movements as a long-term strategy in anticipation of a reversal is trading against the trend. You can lose your entire equity with counter-trend trading. Demo trading is recommended to get familiar with trading and to understand the functionality of the trading platform.

Trading with real money with little or no experience without understanding what it is like to trade live could increase the probability of committing mistakes, resulting in an eventual loss of money. Emotional trading leads to wrong decisions, which is the reason why traders lose money in the Forex market. Trading within a pre-determined trading plan helps in controlling emotions and focusing on long-term goals.

Anticipating trades in this way is like diverting from a pre-defined trading strategy or plan, and even a profitable strategy is useless without discipline. Most traders fail due to the lack of discipline, not due to the lack of knowledge. Learning to be patient and disciplined would drastically improve the proportion of profitable trades.

Using stop loss and profit targets is sensible. However, keeping a very small stop-loss could be risky and it is likely to be taken-out by market volatility even in case of a good trade set-up,and not having a profit goal or hoping for larger profits could result in giving up the earned profits. Furthermore, trading after the news announcement makes the news release less relevant since the market would have already discounted the news into the priceand the trader might end-up initiating a wrong trade.

Moreover, while trading during the news announcements traders might experience slippage and would probably enter a trade far away from the intended price.

Common Mistakes to Avoid in Forex Trading

However, traders fail to take advantage of their mistakes and keep repeating the same mistakes. Always take advantage of your losses and improve your knowledge of the market. There could be many other factors that might hinder you from becoming a successful trader. However, it is important to acquire the proper knowledge and avoid committing common mistakes before venturing into the field of forex trading.

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