10 Trading Mistakes To Avoid On Forex & Stock Market (That Are Stopping You To Make Money)

What’s up Traders, in this article, we’re going to be talking about 10 Trading Mistakes To Avoid On Forex & Stock Market (That Are Stopping You To Make Money).

In this article we’re going to address the most common mistakes that we, as traders make every day, mistakes that are stopping us to become more profitable when trading the markets. 

There is a common sequence of events that most traders go through during their development. 

 

Account balance

We record some good trades, with decent profits, but then we have those days when everything goes wrong and every time some progress is being made, something happens that stops this progress. 

 

Understand the Mistakes you make

 

1. Putting Stop/Loss orders to breakeven too early
2. Trading multiple instruments that are correlated
3. Trying to anticipate the news
4. A focusing on too many Markets
5. Believing that price cannot move higher/lower
6. Changing Indicators/Trading Strategy too often
7. Using too much Margin or Leverage
8. Buying/Selling on unfounded tips or rumors
9. Trading without a Stop/Loss Order
10. Using too many Indicators on charts

If this is something that you can relate to, don’t worry you are not alone. Spending time in this area to understand the mistakes we make is very important to our development as traders. 

So, before you take the next trade, consider these 10 common mistakes you must avoid, as they are the main reasons new traders fail to increase their accounts. 

 

1. Putting Stop/Loss orders to breakeven too early

 

• Don’t move your stops just to be “safe”
• Stick to your original plan

The first mistakes is putting your stop loss order to breakeven when in profit. 

The purpose of a stop is to protect you, if your trade idea doesn’t work out and not to obtain a “risk-free” trade the moment the market moves in your favor. Your stop should be based on technical analysis, and not on the number of points you are in profit.

 

Don’t move your stops just to be “safe”

The market doesn’t care where you entered and where you’re break even. The moment you arbitrarily move your stop to be “safe” you also abandon a technical-based approach to your position. 

 

Stick to your original plan

So, stick to your original trading plan, and let the market prove to you that you’re wrong by hitting your original stop loss, if it moves against you and only move your stop loss when the technicals indicate so.

 

2. Trading multiple instruments that are correlated

Another major mistake is trading multiple instruments that are correlated. 

On forex market, you can often see a very strong correlation between certain forex pairs while on the stock market, you will notice that companies within the same industries and sectors, often move together over long periods. 

Many traders enter positions on trading instruments which are positively correlated, will lead to increased risk. You see, traders often believe that by taking several trades in different instruments they are diversifying and diminishing their risk. 

 

Pay attention to instruments that are correlated

What these traders don’t realize is that, especially if the trading instruments are somehow correlated, they often move in sync and instead of decreasing the risk, they are actually increasing it. So, pay attention to instruments that are correlated.

 

3. Trying to anticipate the news

Another major mistake I personally made was trying to anticipate the news. When I started trading, my main focus was on forex market, where as you know, many currency pairs rise or fall sharply in the wake of scheduled economic news releases. 

Anticipating the direction the pair will move, and taking a position before the news came out, seemed like an easy way to make a profit. I soon found out that it wasn’t. 

 

Potential losing position within seconds

Trading the news may seem easy, with a lot of potential to make easy profits but often the price will move in both directions, sharply and quickly, before picking a sustained direction. 

That means you’ll likely be in a potential big losing trade within seconds of the news release. You may be thinking it’s not so bad after all, with all that volatility, the price could swing back in your favor. Maybe it will, maybe it won’t. 

But there is another problem. In those initial moments, the spread between the bid and ask price is often much bigger than usual. You may not be able to find liquidity to get out of your position at the price you want. 

So, instead of anticipating the direction news will take the market, have a strategy that gets you into a trade after the news. You can profit from the volatility without all the unknown risks. 

 

4. A focusing on too many Markets

 

• Don’t Track and Trade too many markets
• A Market specialist Trades 1-2 Markets

A big problem that inhibits many traders’ success is that they are focusing on too many markets in addition to all the other trading variables they are overly-focused on. Just because you can trade all the markets offered by your broker doesn’t mean you should.

 

Don’t Track and Trade too many markets

Despite this obvious fact, many traders confuse and frustrate themselves everyday by trying to track and trade too many markets.

The solution is to scale-back the amount of data you’re trying to make sense of as you analyze the markets. Putting the odds in your favor is not done by trying to keep track of 10 or 20 different markets and search them for signals each day. 

 

A Market specialist Trades 1-2 Markets

Your aim should be to become a market specialist, who trades on fewer markets. 

 

5. Believing that price cannot move higher/lower

One of my biggest mistakes during my first years of trading was the belief that price cannot move higher/lower. “Oversold” and “overbought” are two overused terms thrown around by nearly everyone. 

When you are being taught on how to trade different trends, using certain indicators, one of the first lessons is to look for overbought/oversold markets and search for entry signals other way around. 

The truth is that markets can always get more oversold and can stay oversold for extended periods. The same is true with uptrends.

I corrected this mistake when a mentor in the business once told me that an overbought or oversold market that doesn’t correct muchis in fact a strong market. 

 

6. Changing Indicators/Trading Strategy too often

Another mistake is changing indicators/trading strategy too often. Let me ask you something : how many times did you change your trading strategy or adjusted your indicator settings after you lost 3 or 4 trades in a row because you thought your strategy wasn’t working anymore? 

We all done this, it’s a common problem most traders face. It’s important that you stop evaluating your strategy based on 1, 2 or 5 trades and Understand the implications of long-term thinking. 

 

Never change your Strategy after a few losing Trades

Never change your system after a few losing trades! If traders would stick to their strategies a little longer and not give up so quickly during times of adversity, we’d probably see a lot more profitable traders. 

You must consider this: losing and winning streaks are normal and no matter how good you are as a trader, they will happen. Don’t give up on your strategy too early. 

 

7. Using too much Margin or Leverage

 

• Excessive Leverage can destroy Trading capital in a second
• Leverage will amplify your potential losses

Another mistake made by many traders is using too much margin or leverage. Leverage is a double-edged sword, because it can boost returns for profitable trades and exacerbate losses on losing trades. 

 

Excessive Leverage can destroy Trading capital in a second

Beginner traders may get dazzled by the degree of leverage they possess, especially in forex trading, but may soon discover that excessive leverage can destroy trading capital in a second. 

In order to become a successful trader, it is crucial that you understand both the benefits and the pitfalls of trading with leverage. When leverage works, it increases your gains substantially. 

 

Leverage will amplify your potential losses

But leverage can also work against you. If your trade moves in the opposite direction, leverage will amplify your potential losses. Remember: the more leverage you use, the less “breathing room” you have for the market to move before a margin call. 

While learning technical analysis, fundamental analysis building a strategy and trading psychology are important, the biggest factor on whether you succeed as a trader is making sure you capitalize your account sufficiently and trade that capital with smart leverage. 

 

8. Buying/Selling on unfounded tips or rumors

A common mistake is buying/selling on unfounded tips or rumors.

Everyone, myself included, probably made this mistake at one point or another in their trading or investing career. You may hear your friends or colleagues talking about a stock/ a currency pair/ a cryptocurrency that will skyrocket and you instantly join the crowd. 

Or you see an investment guru on tv or social media who recommend a specific stock as a must-buy and you immediately follow his advice. Or you read on a forum that the non-farm payrolls will be released lower than expected and you short the euro/usd. 

We’ve all made this type of mistake, of buying/selling on unfounded tips or rumors. The smart thing is to do your own homework. Make sure you “research, analyze, so that you know what you are buying or selling and why.

Next time you’re tempted to buy based on a tip or a rumor, don’t do so until you’ve got all the facts and are comfortable with the information researched. 

 

9. Trading without a Stop/Loss Order

Trading without a stop loss is probably the biggest mistake traders make. Many new traders hate the stop loss orders because very often, after they are stopped out of a trade, the price soon comes back to a point where the trade could have exited with a profit.

So, the next trades they ignore the SL orders and set only take profit orders. And this strategy could work. Until one day, when the price never comes back to manageable losses, and just keeps going against them. 

A good example of a group of traders who were trading without a stop loss and who ended up wishing they had used one were the traders long of the Swiss franc when the Swiss national Bank effectively announced a massive devaluation.

 

Always use a protective stop

The price flew against them for several minutes and many traders lost their accounts in a flash. So, you should always place a stop loss, or better said, a protective stop, at a point where if the price gets there, you would feel wrong about the trade. 

 

10. Using too many Indicators on charts

The final mistake made by traders is using too many indicators on their charts. The debate about trading indicators and their usefulness is probably as old as trading. Nevertheless, there are numerous misconceptions when it comes to understanding and using indicators. 

Many traders arbitrarily add indicator after indicator to their charts because they believe that the more indicators they have, the more efficient they can filter out “bad” and misleading trading signals. 

This approach usually results in bad results when traders suddenly feel overwhelmed by the amount of information they have to process. Besides that, another major mistake is the fact that traders often combine indicators that essentially provide the same information. 

Furthermore, traders rely on trend-indicators when price is range-bound, or try to use oscillators, when markets are trending. 

Remember, the difference between an amateur and a professional trader is not necessarily defined by the indicators they choose or which entry signals they follow, but how they approach trading in general. 

 

Final words

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