How to avoid the mistakes I made at my early career in Forex trading
The frequent mistake that traders make in forex is over trading. Over trading is undisciplined trading and can be catastrophic. It is defined as trading much too often. It also implies that there is always tradeable activity going on in the market. The fact is that most of the time there is no actionable trading activity going on and the market demonstrates this by moving in a relatively tight trading range. It is difficult to make money on tight trading ranges.
If you are always in the market you are also exposing your account to unnecessary risk. The mark of a disciplined trader is to not expose your account to high risk situations. The disciplined trader will only enter the market when there is “edge” that can be exploited by using a strategy that is shown to be successful.
Over trading also comes in the form of trading too many positions. Taking on too many positions suggests that you have identified multiple trading opportunities and that you have high confidence in all of them. This approach is more like taking a “shot gun” method to trading the markets. It is an example of an attitude that believes if you take many shots you are bound to hit something. It is very risky and more akin to shooting yourself.
Trading many positions also eats up your margin cushion. A small market move in an adverse direction could be enough for you to become over leveraged resulting in a margin call for insufficient funds. Brokerage firms have a tendency to become very excited when that happens. High leveraging margin unnecessarily creates high risk to adverse market conditions.
Trading forex on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite.