This post outlines the biggest trading mistakes and certain misconceptions associated with them.

1. Trading with indicators and fancy tools

This misconception is not limited to the purview of Forex traders but all kinds of traders around the world.

Most of the traders believe that using indicators and fancy Internet tools to trade would provide them with an edge over others.

This coaxes several traders to concentrate on learning just about trading indicators instead of the actual price action that these indicators are derived from.

Indicators are definitely important and knowing about them is an integral part of stock market trading.

But, concentrating only on them would be very unwise.

Hence, it is important to remember that indicators provide no real advantage over reading a trade chart.

So, you must never let the use of these indicators fool you into limiting your progress as a trader, who can simply read and understand a trading chart.

Thus, most Forex traders believe that once you begin learning how to trade with price action you will learn why trading with indicators puts off your trading plan completely.

2. Not fully understanding and implementing risk / reward

If there is one thing that all professional traders have in common it is that they fully understand the power of risk reward and how to implement it on every single trade they take.

Beginning traders obviously know the importance of making sure their winners are larger than their losing trades, but they often do not understand how this would turn out to be in real world trading.

It is important to view each trade you take in terms of risk reward.

This would give you a realistic perspective on whether the risk is worth taking and whether you are making the right trading decision.

3. Not understanding position sizing

Many traders come into the Forex market but they do not understand that just because you put a wider stop loss on a trade does not mean you have to risk more money or that just because you put a smaller stop loss on a trade does not mean you automatically risk less.

One of the most common mistakes made by traders in the market is that they adjust their stop loss to meet the number of lots they want to trade, instead of adjusting their position size to meet the most logical and realistic stop loss distance.

Hence, it is important to possess a thorough understanding of position sizing to manage your capital better and to rightly implement risk reward on every single trade.

4. Lack of a well-defined Forex trading plan
Most beginning traders make the mistake of not having a functional trading plan, and they also harbor the misconception that they don’t really need one.

Forex trading needs to be treated as a business, and just like having a business plan is necessary for the growth and prosperity of any business, having a Forex trading plan is necessary for the growth and prosperity of any trader.

A trading plan gives you a clearer view of how your trade is sketched out – where you could make possible changes and how much of capital you can invest as part of each trade.

Most traders care only about how much money they can make and do not focus on the the real risk involved in Forex trading.

A Forex Trading Plan that you might create would keep you well-grounded and help you be focused on how each of your trades might pan out.

5. More of a gamble than a trade

A question you must ask yourself as a trader, every once in a while, is “Am I being a responsible trader? Or am I merely gambling”

The sooner you can answer this question, the safer you would be!

Most of the traders around us would feel doubtful about such a query as it is very much human to lose focus on the process of trading for a while and to meander into gambling after a quick taste of success.

Risk managing is one of the most important factors associated with trading and as most veteran traders would say, the better you manage your risk, the easier it would be for the market to take care of your success quotient.

It is thus very important to control your risk consistently to stop yourself from gambling – as it is not only putting your capital into risk but also letting your money management factors go for a toss.

So, trade responsibly and gather more profit!

6. Letting emotions in

One of the first things seasoned traders would warn you against is letting your emotions get in the way of your trading approach.

Keeping your emotions in control during trading is one of the most difficult as well as important thing to do.

As part of our human nature, emotions come in the way of everything – almost!

Trading is no exception since our hard earned money is one of the key elements at play there.

In the stock market, emotions like greed and fear are often spoken of as factors which can alter the market movements.

This is why people are asked to keep their fleeting emotions in control.

Therefore, it is very important to keep your emotions out of the way while trading as it can affect your perspective and also, trading requires precision and the use of your complete rationale – letting your emotions come in between would deter this objective.

The Forex market is considered to be the perfect arena for self-improvement measures and to control one’s own impulses – at the same time, it can be a place for total destruction.

Thus, it can be a place you create out of your ideas and your trading strategies.

7. Over-trading / being too involved

Another common mistake amongst traders around the world to is indulging in over-trading as an attempt to become an extremely successful trader.

Over-trading or trading for longer number of hours does not guarantee a better hold over success – in fact it is a factor which limits you as a trader.

Most beginner traders do not spend enough time demo trading but jump to the live market directly thus limiting the number of hours they spend perfecting their hold over trading strategies.

This limits your reasoning power as a trader as you are stopping yourself from learning better by skipping steps – follow the steps and learn each factor as it is supposed to be learnt.

8. Limiting one’s knowledge

This is a pointer that is not limited to just Forex Trading.

Limiting your knowledge would cause trouble later – though it might seem like the easier way out for you in the beginning.

Make sure you are not too involved in the workings of the market.

Trading is an element which requires you to dissuade all emotional ties while being a part of the market.

Conclusion

Therefore, as a Forex trader, make sure that you know your currencies well enough and the Forex market must be an arena you know like the back of your hand!

Take time to gather as much of training as possible – read up and research for longer periods.

Undertake demo trading for weeks (or even months) before entering the live market.

Make sure that you have checked out all the elements that you need to familiarize yourself with before taking on Forex trading completely.

how market really work?

In my opinion a significant mistake is to treat the trading financial markets just as an entertainment or a hobby , while this is a business. When your purpose is not clear, this really influences the level of your commitment to trading and also defines your attitude towards the money you invest.