Biggest Forex Trading Mistake To Avoid
August 11, 2010 by Kelvin
Filed under Currency Trading FAQ
This is a question that is asked by one of our newsletter subscriber.
What is the biggest mistake that most traders make in their trading?
What I am writing is my personal opinion and there is no right and wrong to this question. To me, the most important factor to success in forex trading lies in the win loss ratio. After communicating with so many traders, I feel that the biggest forex trading mistake they often commit is
“Let their losses run and cut short their profit”
Have you ever had the experience of adjusting your stop loss so that your current position will not be stopped out. When you are doing this, you are actually increasing the amount of loss you are going to get. It is very important for traders to be able to cut short their wrong trade so that they can trade another day.
Another common mistake that I have heard is the problem with averaging.
There are traders who add on to losing position so that their break even point becomes nearer. What they do not know is that they are adding more losing position to a wrong trade and this is something you have to avoid in trading.
Besides adjusting stop loss, there are also traders who will quickly exit their winning position fearing that the market will reverse and take everything back. Not allowing your winning position to run is what constitutes to low win loss ratio.
Due to the habit of adjusting stop loss and rapid exit of winning position, these traders usually complain that their one loss has taken up all their profit. There are a number of mistakes that most traders commit but I will not go through all of them here in this article. However I will address them in my future posts so that all of you can avoid committing them in future.
If you have another forex trading mistake to share, do feel free to comment below so that everyone can benefit from here.
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I enjoyed reading this article as most of the mistake said is what I have done and end up losing. I did not have good trading strategy, I only use MACD and EMA and it perfectly worked for the first 6 weeks and had a good win. However, I sometime come out of trade early not to end up losing and also have adjusted my stop loss not to stopped out and all that contributed to my loss. I am now look at different strategies but there are a lot and don’t know which is right. What I am being told is to choose what suites me. I need an advise or comment here, I am a day trader which strategy is best for short term day trade? I would like to hear from you if I need to explain myself more.
Thanks again for this good article.
I agree 100% with you! Earlier I have been doing exactly that: giving a huge stop loss in a hope that the price will eventually turn my way, plus never having fixed TPs, all resulting in me losing every trade. Now what I did is two things. I went to my strategy and reviewed my SL concepts, so that I can be comfortable with it and that it makes sense to me why I use the stop loss that I use. The second thing I did was to use trailing stops of about 10-15 pips – this has increased my profits dramatically! I would advise anyone to do some calculations and back-testing, to design a strategy that you are at ease with and are relaxed about, and then to stick to it 100000%!