Common Forex Day Trading Mistakes To Avoid
All traders make mistakes at some point in their career. When you do make mistakes you should learn from them and move on. Of course, a better option is to learn what the common forex day trading mistakes are before you make them and learn from them. This saves you time and money as you do not make the mistakes yourself.
Overestimating Your Abilities
A lot of traders start to overestimate their abilities once they have had few successful trades. You should never do this as it leads to mistakes and trades opened on feelings instead of analysis. The most common overestimation is: believing that you can predict what the market is going to do. There are very few, if any, traders that can do this. The market is often too volatile and can move in unexpected ways.
Relying on Science
In our everyday lives technology does help make our lives easier. In forex trading the same could be said as technology offers insights into the market that you may not be able to determine yourself. The problem comes when you start relying too heavily of systems and software. There are a lot of systems on the market that offer analysis of the market. While you can use these systems they should not be your only analysis of the market.
When you learn about technical analysis you are told about the indicators which tell you to trade. The fact is that some of these indicators could be wrong and you should not trade on all of them. If you do trade on every indicator it is possible that you will start overtrading and over complicating the elements of analysis that lead to these indicators.
Forex Day Trading Lag
A lot of forex day traders use lagging indicators. These lagging indicators include moving averages and Bollinger Bands. The problem with lagging indicators is that they give you information after it has happened in the market which could cause you to miss the best entry point of opportunity. You should use a combination of lagging and leading indicators to get the best analysis of the market.
Short Term Movements
If you are looking to incorporate long-term trading into your trading style then you have to ignore short term movements. These movements are ideal for day traders but they do cause losses for long-term traders. The people who make this mistake the most are long-term traders who have hit a losing streak. They often mistake the day trading movements as trends and open long-term positions based on them.
Reading the trading System Small Print
Everything in life has small print and you have to read it to ensure you understand what you are buying. Many trading systems have a clause in their small print which states simulated in hindsight. When you see this clause you should consider not getting the system. This clause means that the track record the system shows you was created after the fact and could very well be wrong.
Using Too much Leverage
A very common mistake is using too much leverage. The fact that you have 400:1 leverage can be very tempting buy you need to resist. Of your trading strategy does not allow the use of leverage then don’t use any.