Forex Strategy Trading Tips: The most frequent Forex Trading Mistake and the way to Avoid It
Being a Fx trader you're going to have to develop several skills as well as developing reactions to different trading scenarios. Sometimes this is often easier said than done. After helping many hundreds of traders, I have noticed that the majority of them are unsuccessful at Forex strategy trading for the exact same reason, they over-trade. But how do you know when you are over-trading? Here's a quick guide that can assist you recognize when you're over-trading and the ways to stop it.
How many strategies have you been using?
I've met people who were trading between 5-10 different strategies and of course there were not making any money, but why is that? Well, apparently the more strategies you employ, the less you concentrate on the FX market market itself. Getting to know the market and your strategy is essential to becoming profitable and consistent, but this is impossible to do when you've got 3, 5, or 10 different strategies to focus on.
How much are you presently risking on every trade?
Understanding how much you're risking is a lot more important than understanding how much you're going to make. This is exactly why money management is very important. I have come across traders move from the losing side to the profitable side just because they implemented money-management into their trading.
How do you feel when you're earning money?
The typical answer to this question is great, and many people do not realize they've become greedy until it's too late. As people we usually tend to get greedy when things are going well for us. I've been there, done that, and the result was not good. When you are getting greedy you are more likely to act reckless and commit mistakes.
After asking yourself these questions you should have a much better idea of where you are. Over-trading can be as harmful as utilizing a strategy with a low ROI (return on investment). Now let's discuss how you can prevent yourself from over-trading.
Have a trading plan: you should know where you are going to exit a trade BEFORE you even enter it. Also, make sure you have a set of rules in place for other trading variables for example take profit levels, stop losses, and progressive TPs.
Learn about your trading style: this is very important because the type of MM (money management) you employ for one trading style is different than the one you use for another one. If you're a scalper you will probably use small percentages in each trade (0.5% to 2%) as you are taking a lot of trades. A swing trader might use a much bigger percentage like 3% or 4%, it all really is determined by your trading style and Forex strategy you use for Trading. Due to this fact, being familiar with your trading style will assist you to become more effective as a trader and take better decisions.
I'll be posting more tips on how to avoid overtrading on a future article, thank you for reading and happy trading!
Sincerely,
Jay Molina
Advanced Trader & educator
Questions and Answers
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