Recognising Your Forex Trading Mistakes
The majority of traders view any non-profitable trade as a forex trading mistake. However, this is neither correct nor beneficial to your overall trading strategy. Mistakes should be trades lost due to factors you have no control over. It is through identifying the causes and learning from these losses that you will become a more effective trader.
What is a forex trading mistake?
A forex trading mistake is the situation where a trader diverges from the trading rules they have set for themselves. It is important that each new trader develop a trading plan that details and they should trade. This plan also facilitates all potential variables in trades giving the trader a foundation on which to build their strategies and style. Once this trading plan has been developed it should be tested and immediately implemented if found sound. Your trading plan is personal and should be unique to your requirements. This means it can be as basic or complex as you would wish as they are your rules. The most important aspect is that you are comfortable with the plan and can adhere to it easily.
Forex trading plans allow an individual to assert a particular degree of control over a highly volatile market. Without a plan for any profitable trades one can be assured to incur great losses due to pure confusion and an overwhelming inability to fully understand the trades.
While many traders view a lack of trading plan as a mistake this is an issue you can rectify. It is vital you create a plan otherwise all your trading behaviour will viewed as a mistake for you will not have control over anything.
What exactly should the trading rules over?
In order to limit the amount of mistakes one can potentially make while trading the forex market it is best to develop a forex trading plan. These trading plans are rules which you should trade by. It is important to remember that the forex market has various elements so it is recommended you have various plans for the different market patterns and trading strategies. This will be most beneficial as you cannot change the market pattern but you can take advantage of the opportunities by controlling your behaviour when particular patterns occur.
In order to be effective the forex trading plan must cover all potential obstacles you may face when opening a trade. This is to ensure you are prepared to trade in any market condition. You must also include different trade sizes into the plan as this may change your trading behaviours. It must be mentioned that while you may have a trading plan you can still incur detrimental losses if you do not adhere to it. This divergence from trading rules often occurs when a trader experiences an emotional reaction to market behaviours thus making emotional trades.
Another aspect the trading plan should cover is when you will be trading and how your trading will alter according to the time of day. It should also look at the amount of currency you will be trading with. It is imperative you check your rules regularly to ensure they are still relevant and still suit your current trading style.