Grave trading mistakes in the Forex and financial markets that waste your capital

Common Forex trading mistakes caused people new to the financial markets or who got emotional overnight to lose capital.

Contents

Intro

All Forex traders, even the most experienced, are bound to make mistakes progressing. Some may realize this fact, but they may return to their old habits. Making mistakes in trading is common and inevitable. But the continuous repetition of these mistakes will deal you a painful blow, an irremediable loss that may bring you to the brink of bankruptcy.

Some people lost millions of dollars overnight in the cryptocurrency market (the bear market's start in 2018 or the Luna crash in 2022), investors who lost almost all of their capital in the 2008 US financial crisis, or NFTs that went from millions of dollars to zero and their owners saw their capital wasted forever.

So identifying serious Forex trading mistakes can be the first step to preventing them from recurring in the future because you don't know about some of them yet. We can state these errors in twelve cases:

1. Stop trading after several consecutive losses
2. Trading without stop-loss
3. Psychological resistance to strong trends
4. Not placing take-profit
5. Opening a trade on a trend you just exited
6. Overtrading
7. Not placing daily stop-loss
8. Using high leverage or risk more than capital management
9. Trade with loan money or required savings
10. Not having a clear trading strategy
11. Trading for fun
12. Trading when you are tired or in an unbalanced emotional state

Below, we will explain each of them in detail and help you prevent them from occurring during your trades.

Stop trading after several consecutive losses

If you lose a few trades in a row, you should give yourself a break and think a little. When you start losing money consistently, and things don't seem to be going well, step away from the chart and system. Take a break to clear your mind and start over the next day or even the following week. Resist the temptation of trying to recover lost funds because taking revenge on the market is impossible.

Undoubtedly, every trader has had this experience once. The psychological stress of losing real money is heavy. As a trader, you need to take care of yourself, your money, and your peace of mind because taking revenge on the market will always lead to loss. This market is dangerous for people who enter without training.

Trading without stop-loss

This alone is one of the most fatal mistakes you can make as a trader. Novice traders, who are not aware of the market's volatility extent, often make this mistake, and the market punishes them with a strong slap at the beginning. You're wrong if you think you can control the trade and close the position manually when the situation turns against you.

The speed of fluctuations in financial markets is so high that it takes away the ability to respond promptly, even though when traders are in a loss situation, they unconsciously hope for a change in trend to make up for their loss, which usually does not happen and it becomes a loss. Their transactions are more than before.

Psychological resistance to strong trends

You must understand market trends and distinguish between major trends and short-term trends. You should accustom yourself to financial market cycles and recognize the four main phases of each cycle, which include accumulation, ascent, distribution, and descent. Always remember that you are a trader, not an investor.

If the trade goes against your analysis, don't convince yourself that the trend will come back after a while and you will make a profit because the trend will never come back! Don't move your stop-loss hoping the market is wrong. This action is considered equal to disorder and is unacceptable for the trader. Order in trades will save you from grave Forex trading mistakes and bring you continuous profit. Don't let one big loss destroy the profits of many good trades.

Not placing take-profit

When your trading is going in the right direction, control your emotions and save a part of your profits. That will help you increase your win rate and ongoing profitability in the long term. Many traders get excited to see the profit number and fall into the illusion of the profit growing 10X or being rich.

But the market does not think like them and can recover all the profits the trader made in a fraction of the time. That is why take-profit is crucial. Just as you have a stop-loss for your trades, you should also have a take-profit, as the market is full of possibilities, and you should not let your profits go to waste.

Opening a trade on a trend you just exited

It has certainly happened to many traders that after entering a trade and setting a certain take-profit , the price reached this take-profit, and the trade was closed with profit. However, shortly after exiting the trade, they see that the trend is moving in the same direction as the previous one, so a feeling of greed overcomes them, and they enter into a new trade in the same direction to obtain all the market profits.

Unlike the analysis, entry is more likely to be associated with loss. If you are fortunate, you will only lose part of the previous profit, realize your mistake, and stop trading. If you are not lucky, you will not only lose your entire profit, but by taking compensatory positions, you will add to the loss and become mentally disturbed. Eventually, what could have been the best trading day turns into a nightmare.

If you want to survive in this market, you have to repeat to yourself every day that the profits of the entire market do not belong to you! If traders had such precise ability, they would all be billionaires.

Overtrading

As a trader, your goal should be to make continuous profits from the Forex market, not to make irregular large profits. Achieving steady profit while not losing will be the key to your survival in this market.

Trading a lot and opening many positions will eventually only make the brokers richer and will not bring you any profit. Identifying the right legal trading strategy is relatively straightforward but is often forgotten in the financial markets. Take the time to get to know yourself, your patience, your goals, and your trading methods to ascertain what you want from the trading world.

Not placing daily stop-loss

If you ignore this problem, after a few weeks, you will go bankrupt! In the beginning, all traders believed that they could control their daily losses, but psychologically, no one can overcome the feeling of loss, and in such a situation, one mistake after another will happen and become one of the worst grave trading mistakes in Forex.

It is not enough to choose a mental number for yourself, because you will inevitably increase it again after you reach the required level and increase your loss. Daily stop-loss is the loss amount after which a trader must stop trading and do nothing until the next trading day, preferably staying away from the market.

Using high leverage or risk more than capital management

Capital management is the main reason for a trader's success in the financial markets. No matter how strong an analyst or highly skilled trader is, unless you have strong capital management t, you will not be able to make consistent profits in the financial markets.

High leverage in the Forex market confuses traders and often makes them greedy to open trades with high volume. This event is ultimately costly for traders who do not have capital management, and one day will drive them out of the field.

Trading with loan money or required savings

All the world's top traders have always pointed out that to enter the financial markets, you must enter with your excess capital. The reason for this problem is related to trading psychology. But in short, we can say that a trader who enters the market with little capital cannot manage himself smoothly and wants to bear the highest possible risk amount with the smallest capital.

When these traders open a trade, if they are in profit, they do not allow it to advance to the final target and close the trade with a small profit, and when in loss, they move or remove the stop-loss order so as not to lose the same small capital, which this issue will eventually lead to more losses.

Read More: Forex Trading Psychology (The importance of psychology in trading)

Not having a clear trading strategy

Every trader must have a specific trading strategy to achieve consistent profit in the Forex market. This strategy is obtained through training, gaining experience, knowing yourself, knowing your mentality, and knowing different trading methods. After creating a profitable strategy, the trader should update it every week or every month by evaluating past results. Remember, you must always strive for improvement and continuity and avoid repeating past mistakes.

Trading for fun

Resist the urge to trade on a whim. Don't trade just because you feel you have to. In this case, it will only lead to fatigue, frustration, and disappointment. Because, at the end of the day you have a lot of closed trades, and in the best case, if you haven't lost, you're on your toes.

Trading when you are tired or in an unbalanced emotional state

One of the most significant trading mistakes in Forex trading is when the trader is psychologically or physically tired, does not have sufficient concentration, or is not emotionally relaxed.

You are far from your 100% mode, and serious errors can accompany any analysis at these times. There is no obligation to trade every day. Try to always be at your best, and do not see trading as a habit.

Summary

We explore some of the most common and dangerous mistakes Forex traders can make, in this article. We explained how these errors can lead to huge losses and even the loss of your entire capital. We also provided practical and effective solutions to prevent or correct these errors. We hope this article helps beginners and professional Forex traders get better returns from their activities and reduce unwanted risks. Meanwhile, they can earn continuous profits from this market by creating a good trading strategy.