How To Avoid Common Mistakes in Forex Trading

Forex trading has become a big issue even to the experienced traders talkless of newbies who do not know much about trading forex strategies. Before you click that trade you better consider the following steps;

1. If You Loss Consistently, Stop Trading For A While

There are two ways in trading is either you win win or loss loss i.e Your win ratio and risk/ reward ratio. Your win-rate is how many trades you win, expressed as a percentage. For example, if you win 60 trades out of 100, your win-rate is 60%. Try to keep it simple though, and use strategies that win more than 50% of the time and offer a better than 1.25 reward/risk ratio.

2. Don't Trade Without Using Stop Loss

Have a stop loss order for every single forex day trade you make. A stop-loss is an offsetting order that gets you out of a trade if the price moves against you by an amount you specify.
Your loss is moderated. Take it and move on to the next trade. In addition, never place your stop loss too close to the trade as market swing up and down. It may move against for certain reason but with good strategy, market may test your entry and swing back to your direction later but your stop loss button too close to your entry may opt you out suddenly after market may go your plan. So put that in mind always.

 3. Never add to a losing day trade 

Adding to a losing trade is a dangerous practice. The price can move against you for much longer than you expect, as your loss gets exponentially larger. Instead, take a trade with the proper position size and set a stop loss on the trade. If the price hits the stop loss the trade will be closed at a loss. There is no reason to risk more than that. 

4. Don't risk more than you can afford to lose

 Day traders ideally should risk 1% or less of their capital on any single trade. That means that a stop loss order closes out a trade if it results in no more than a 1% loss of trading capital.That means that even if you lose multiple trades in a row only a small amount of your capital will be lost. At the same time, if you make 2% or 3% on each winning trade your losses are easily recouped.

 5. Never go all in Trading

There will be times you are tempted to ignore it and take a much larger trade than you normally do.The reasons vary. You have had several losing trades in a row, and you want to make back some losses. You are trading very well lately, and feel like you can't lose. You feel so confident about this particular trade that you are willing to risk almost everything on it.Stick to your 1% risk per trade rule and your 3% risk per day rule.  

6. Don't try to anticipate the news

 Anticipating the direction the pair will move, and taking a position before the news comes out, seems like an easy way to make a windfall profit. It isn't.Often the price will move in both directions, sharply and quickly, before picking a sustained direction. That means you will likely be in a big losing trade within seconds of the news release.

 7. Don't choose the wrong broker

Depositing money with a forex broker is the biggest trade you will make. If it is poorly managed, in financial trouble, or an outright trading scam, you could lose all your money. Take time in choosing a broker. There is a five-step process you should go through when deciding on which broker to use.

8. Don't take multiple trades that are correlated

 If you see a similar trade setup in multiple forex pairs, there is a good chance those pairs are correlated. That is why you are seeing the same setup in each one. When pairs are correlated, they move together, which means you will probably win or lose on all those trades. If you lose, you have multiplied your loss by the number of trades you made.

 9. Don't trade off fundamental or economic data 

 It is easy to get caught up in the news of the day or to form a bias based on an article you read that says economic conditions are good or bad for a particular country or currency.The long-term fundamental outlook is irrelevant when you are day trading. Your only goal is to implement your strategy, no matter which direction it tells you to trade. Bad investments can go up temporarily, and good investments can go down in the short-term.Fundamentals have absolutely nothing to do with short-term price movements, so don't even look at fundamental analysis while day trading. Any long-term biases can only cause you to deviate from your trading plan. Your trading plan and the strategies it contains give you an edge in the market and prevent you from gambling.

 10. Don't day trade without a plan

 A trading plan is a written document that outlines your strategy. It defines how, what, and when you will day trade.Your plan should include what markets you will trade, at what time and what time frame you will use for analyzing and making trades.Your plan should outline your risk management rules. It also should outline exactly how you will enter and exit trades for both winners and losers.If you don't have a trading plan, you are gambling. Create a trading plan and test it for profitability in a demo account before trying it with real money.

Then follow your plan precisely.
 Happy Trading,