Errors That Forex Traders Make And How To Avoid Them! (Series 2).

Earlier, we commenced a series on the various errors encountered by Forex traders and the ways to avoid them.

There, we identified the choice of broker, lack of a trading plan and the lack of proper risk management as the errors factors, and also recommended solutions.       

In case you missed Series 1, you might want to go over it right now before we dive into the second and final series!

Done? Let's move!

 

4. Taking Several Uncorrelated Trades At Once

Taking multiple trades (diversification) is great. However, to be successful at it, you don't just take them haphazardly at your own free will!

Diversification is not just an act, it is a strategy, and it depends on your level of knowledge, experience and the currency pairs you're trading.

Therefore, taking several trades that are not correlated will not just increase your trading risks but also result in trade losses.

Correlated currency pairs move together in a similar direction, indicating that profits or losses will be simultaneously recorded on all pairs - and you want to ensure it's a profit!

So, if you have to take multiple day trades concurrently, ensure that they move independently of each other.

 

5. Ignoring Your Strategy and Biting More Than You Can Chew

You can't take a full plate of spicy jollof rice after gorging on kingsize shawarma, a bucket of Kentucky chicken and French fries just because you're in a good mood and have a large appetite.

It's your tummy and not a balloon! 

In the same way, you should never ignore your trading strategy to take much larger trades than you would normally do, all because the market is 'pregnant' with profits.

It's tempting to lose your rationality and blindly 'roar' back at your losing streaks in desperation for a thunderous 'comeback'. This does not always work and is sure to compound the problem!

Ensure to stick to your '1% risk per trade' and '3% risk per day' rules. Resist temptation, stick to your risk management strategy and avoid going all in or adding to your position no matter what happens.

 

6. Trading Without a Stop-Loss Order

The Stop-Loss is not just a protective mechanism, it is a 'lifesaver' and a sort of 'mini Messiah'. 

It takes you out of a bad trade if the price moves against you by a number of pips you specify.

By setting a stop-loss order on your trades, you are taking a large portion of risk-off your trades, as it will prevent you from losing more than you can handle.

Those are just a few of the various errors made by Forex Traders in the course of their Forex trading journey.

 
How many of the above errors here have you committed? What about those highlighted in Series 1? Let me know in Section 2!
 

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