Forex trading is a risky activity, and many traders are often misled into making the same trading mistakes over and over again. In this short article, I’ll share with you 2 of the biggest mistakes that traders often make.
Mistake #1: Using Too Many Indicators
This is a common one. There is a misconception among traders that the more technical indicators they use, the more accurate and profitable their trades will be. Unfortunately, unless you’re trading for a big bank or financial institution, you won’t have access to the advanced computers and software that they have.
As retail traders, we won’t have the resources, time or expertise to properly use multiple indicators at the same time. For us, the true path to profitability lies in the beauty of simplicity. The key is to choose the few indicators that are most effective for your trading system. Don’t include extra indicators that dilute the effectiveness of your core indicators.
Mistake #2: Adding To A Losing Position
This is one of the deadliest mistakes for a trader to make.
For example, your first trade starts going in the opposite direction and you start losing money. However, you’re absolutely convinced that this is a temporary retracement and that the market will soon go back in your direction. Finally, a combination of greed and stubbornness lures you to place another trade in the same direction as your first one.
Sound familiar? It should… I’ve personally not known a single trader who has never experienced this same situation. We all go through it sometime during our trading career.
The big flaw of adding to a losing position is that the subsequent trades are based on only one thing: Hope. And hope is a trader’s greatest enemy. Don’t trade with hope; Trade with evidence of price momentum and confirmation signals. NEVER add to a losing position.
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Harold Hsu is the owner of http://ForexSystemProfits.com where he provides premium Forex trading information and resources.
