The market is a powerful force that ebbs and flows without any restraint and there is absolutely no way we can control it. Losses are a natural and inevitable part of the forex trading game. Even the world’s most successful traders encounter losses in their trading lives. Learning how to avoid the most common mistakes in forex trading is an essential part of your journey to becoming a successful independent trader. If you can learn to recognize and avoid these, you are already well on your way to achieving success in the forex market.
There is a tendency for traders to dwell on mistakes, particularly when there seems an obvious cause or misinterpretation along the way. But in many respects, losing money when you make a mistake is one of the quickest ways to force you to learn from your errors and get into a position where you don’t make the same mistake again. As time goes by and you move through the forex trading cycle, you will inevitably come across losing trades, and you will inevitably make mistakes. Certainly, try to avoid losing at all costs, but it is important that when you do lose, you realize it is all part of the game and move on with your trading.
Changing your approach after a few losing trades set you back on the learning curve. A sudden market collapse, an unexpected news release or the loss of your internet connection can happen at any minute. Be prepared by having a fixed stop loss in place. If a single trade could wipe out your trading account, you have not done your homework as a trader. Even if you are a purely technical trader, you do not have to trade the news, but you have to be aware of them at any point in time.
Successful people seem to have a completely different mindset around losses and failure because they think about it differently. In trading, this would translate to not letting every trade (win or lose) determine your sense of value because this will make you totally dependent upon the results at the beginning which is a precarious time. Instead, focus on what you need to do with the information being presented in the loss or mistake you made. This will keep you focused on moving forward instead of becoming judgmental about your process. Don’t let the pain of the loss color your experience. Use it as fuel to learn to trade better.
Before you start trading real money, open a forex practice account and use virtual funds to try out trading plans and get a feel for the trading platform you are using. Although you will not be affected by your emotions the same way you will be when trading your own money, this is also a chance to see how you react to trades not going your way and learn from your mistakes without the risk. Eventually, you need to transition from demo to a live trading, and it is advisable to start with a small trading account where you can continue trading and learning from the mistakes which will occur along the way.