Being a forex trader you’re going to need to develop a number of skills along with developing reactions to various trading scenarios. Sometimes it is easier said than done. After helping hundreds of traders, I’ve noticed that the majority of them are unsuccessful at Forex strategy trading for exactly the same reason, they over-trade. But exactly how do you know when you find yourself over-trading? Here’s a quick guide that will assist you recognize when you are over-trading and ways to stop it.
How many strategies are you currently using?
I’ve met folks who were trading between 5-10 different strategies and of course there were not making any money, but why is that? Well, apparently the more strategies you use, the less you focus on the forex market market itself. Getting to know the market and your strategy is essential to becoming profitable and consistent, but this is impossible to do if you have 3, 5, or 10 different strategies to pay attention to.
How much are you risking on every trade?
Understanding how much you’re risking is a lot more important than understanding how much you’re going to make. This is why money management is so important. I know of traders go from the losing side to the profitable side just because they implemented money-management to their trading.
How do you feel when you’re making money?
The most frequent answer to this question is great, and many people do not realize they’ve become greedy until it’s already happening. As human beings we often get greedy when situations are running nicely for us. I’ve been there, done that, and the result was not good. When you are getting greedy you are more likely to act reckless and commit mistakes.
After asking yourself these questions you should have a much better idea of where you are. Over-trading is really as harmful as using a strategy that has a low ROI (return on investment). Now let’s discuss how you can prevent yourself from over-trading.
Employ a trading plan: you should always know where you are going to exit a trade BEFORE you even enter it. Also, be sure you have a set of rules set up for other trading variables for example take profit levels, stop losses, and progressive TPs.
Discover more about your trading style: this is very important since the type of MM (money management) you employ for one trading style is different than the one you use for another one. If you are a scalper you will likely use small percentages in each trade (0.5% to 2%) since you are taking numerous trades. A swing trader might use a bigger percentage like 3% or 4%, it all really depends on your trading style and Forex strategy you use for Trading. Because of this, being familiar with your trading style will assist you to become more effective as a trader and take better decisions.
I’ll be posting more tips on how to avoid over trading on a future article, thanks for reading and happy trading!
Best wishes,
Jay Molina
Advanced Trader & educator
JM is an advanced Forex trader that helps other investors around the world to learn about the Forex market and its rewards and risks. Learn more about forex strategy trading by visiting this link: http://myforexventure.com
Article Source: http://EzineArticles.com/?expert=Jay_Molina
http://EzineArticles.com/?Forex-Strategy-Trading-Tips:-The-Most-Frequent-Forex-Trading-Mistake-and-How-to-Avoid-It&id=6240111