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Although in many respects we learn from our mistakes, when it comes to online forex trading, making too many trading errors can be stressful, timely and of course, costly. Both amateur and professional traders often commit the classic forex trading mistakes listed below, and whether you are trading forex, CFDs, or precious metals, it is better to be aware of some of the most common pitfalls, and do your best to avoid them.
Trading Forex Without a Plan
One of the worst mistakes any trader can make is to approach their forex trading without implementing a solid trading plan. Trading without a plan is incredibly risky, often resulting in unnecessary stress and losses.
Having a strategic trading plan will help you to make valuable trading decisions, such as departing from a difficult trade in order to avoid a massive loss. Having a plan will undoubtedly enhance your trading success as you will find it far easier to get back on track after making a trading error.
Nevertheless, a plan can only be implemented with a thorough knowledge and education of the forex industry, as well as a suitable amount of currency trading experience.
Trading with a plan should come hand in hand with maintaining a proper trading journal. This will allow you to thoroughly assess your trading activity, review any patterns that have contributed to your success, or failures, and identify your weaknesses.
Leaving a Position Open Without a Stop Loss and Take Profit Order
Leaving a position running without setting a stop loss and take profit order can do irreparable damage to your account. Most forex brokers keep your trades open until you have closed them, but during turbulent market activity, it is all too easy to exit your trading platform without remembering to close your position, resulting in a frantic consumption of your funds.
For this reason, placing a stop loss and take profit order on your open position helps to limit losses, determine your loss in advance and avoid having to trade on panic and emotion when your trade has taken a turn for the worse.
Getting Ahead of Yourself by Using High Leverage
Trading forex for serious money shouldn’t be taken light-heartedly and plenty of leverage can lead even the most skilled trader to make impulsive trading decisions. Trading with real money should be done with absolute caution and wisdom, so keep your leverage at a sensible range (usually the amount of leverage ranges from anywhere between 50:1, 100:1 or 200:1 for most positions) to avoid sharp drops in the market and even sharper drops in your bank account.
