Before you open a live forex account, it is important that you familiarize yourself with the most common mental mistakes new traders make.
You’ll probably still make them anyway, but at least you’ll actually be aware you’re making them which hopefully will make easier for you to correct them.
Trading for a living can be a dream come true, but it can also be a nightmare. If you believe trading is easy, you’re done before you even started. Trading is not easy. Trading is hard. Real hard. It’s hard to consistently remain mentally focused and stay disciplined. Know that going in and you increase your chances of success big time.
2. Lack of Emotional Control
Your mind always assumes the worse. It does that to protect you from harm. Because there is a potential that you’ll lose money and all the mental anguish that brings, the mind tells you not to do a trade.
You have to learn how to override this self-protecting mechanism if you want to be a trader. Talk to your mind. Tell it you are fine with doing the trade. Remind it that have a stop placed and you will not be harmed if it doesn’t work out.
Convince your mind that in order to make money trading you need to take risks and the risks that you are taking have been carefully planned and measured.
3. Fooling yourself
Once you are in a trade do not try and justify its merit. The market does that for you. The final outcome of your trade should be a stop loss triggered, breakeven, or profit taken.
Once the trade is completed, don’t dwell on it. Every trade is different and what worked this time may fail next time. Review it briefly and go on to next trade.
Focus on the overall trading and don’t spend too much time on each individual trade. This will make you an excellent trader. Accept the outcome of your trades, but don’t accept not sticking to your game plan.
4. Jumping the gun
Traders are constantly jumping into the right position at the wrong time because they’re afraid they are going to miss it, especially at market turning points.
Don’t be afraid to miss the first 25% of the move; and get out after 75%. Catching 50% of a confirmed move will produce awesome results. You will also not have to deal with getting stopped out and then watch the price reverse and go in your direction.
5. Not thinking in probabilities
Accept your trade losses as a fact of trading currencies. Don’t beat yourself up over them or try to unnecessarily tinker with preset stop loss and take profit. Don’t expect to be right 100% of the time.