No matter how long you have been trading on foreign exchange (forex) markets, you are bound to experience lapses in trading discipline, whether they are brought on by unusual market developments or emotional extremes. Even if currency trading may seem easy and as a trader, you get informed and you follow every recommended step, there are some common mistakes and traps that give troubles to many traders at some point in their career.
Most novice traders dive head first in the market with high profit expectations, believing they will get rich in no time. This is simply not the case. Yes, there are people who are very successful in trading forex, but the majority lose their money. In any case, success takes hard work and a lot of time. It can take years to build up experience and turn forex trading into a profitable full-time job. One of the most common mistakes that are made by day traders is that they do not realize the time that is needed to be successful.
Opening up a trade without a concrete trading plan is like asking the market to take your money. If the market moves against you, when will you cut your losses? If the market moves in your favor, when will you take profit? If you haven’t determined these levels in advance, why would you suddenly come up with them when you are caught up in the emotions of a live position? Novice traders may be unlikely to have a trading strategy in place before they start trading. Even if they have a plan prepared, they are more inclined to abandon it, if things are not going their way.
The main enemy and biggest mistake trigger of a novice trader is his emotions. When watching the deposit increase or decrease, beginners can lose their minds and take hasty steps to get more money or to stop losing it. This approach is no good. Decision-making should be well-reasoned, rather than emotion-based. In order not to increase tension, place a take-profit and a stop-loss and leave the market alone; don`t monitor it day and night.
Incorrect money and risk management is another cause of traders losses. Most of them ignore the fact that they can lose on any trade, so they risk too much money per trade. If only one over-leveraged trade goes against you, it will set off a chain of emotional errors that will affect your trading account a lot faster than you think. No matter if you are a beginner or a professional on forex trading, these traps can affect anyone and you must be very careful in your decisions and do not act emotionally.