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May 21, 2021

Mistakes to Avoid When Trading Forex

Theo Ashley-Hacker

Trading Without a Strategy

Developing and trading with a strategy is the easiest way to improve your trading. Emotions are one of the hardest barriers to overcome in trading, but by trading with a plan you not only remove your emotions from the equation but also guarantee more consistency. You will be able to see what doesn't work and can fine tune your strategy accordingly. Its highly recommend that you start off in a demo account to develop a strategy.

Improper Risk Management

Ask any trader what the most important aspect of trading is and they will say risk management. Risk management isn't just keeping your losses small and not risking more than x percent of your account in one trade. In fact one of the easiest mistakes to make is being too cautious. Too often people see their trade run into profit and instantly move their stop loss to break even or just close the position. Its important that you give the market the respect to run you into a proper profit at which point you can consider moving your stop. This is another reason why sticking to a plan is really important .

Ignoring Fundamentals

When starting out it can be easy to get wrapped up in the charts, analysing the candles, looking for the perfect technical pattern, it's easy to forget what drives the currency markets: Banks and large institutions moving their money around to invest and get the highest interest on their capital. And while its less relevant on the lower timeframes, the impact of fundamentals should never be underestimated. I wrote an article on the main factors that influence the markets here.

Blindly Trading Other People's Signals

Trading off signals is a trap. Like many other 'get rich quick' schemes on social media, if you get lucky they may work for you in the short term but are almost never viable long term. Even if you find some consistent signals, your not actually learning anything, and in the long run you are setting yourself up for failure. Signals can be a good way of learning if you understand exactly why the person making the trade is doing so and how you can apply it to your own trading.

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