Common Forex Trading Mistakes That Forex Traders Make From Forex Expert Carmelo Cerrelli

Trading forex is a challenging and rewarding endeavor, but unfortunately for most retail traders, the challenges far outweigh the rewards, simply because there are some common forex trading mistakes which makes successful forex trading, a challenging proposition, infact nearly impossible.

According to forex expert Carmelo Cerrelli, when getting started in forex trading, there are some common mistakes to be avoided. Here is a list of common forex trading mistakes:

• Running losers and cutting winners

The most common trading mistake is holding on to losing positions for too long and taking profit on winning trades too soon. The key to limiting losses is to follow a risk-aware trading plan that always has a stop-loss order and to stick to it. Always remember, the sooner you are able to accept small losses as part of everyday trading, the sooner you will be able to refocus on spotting and trading winning strategies.

• Trading without a plan

Resist the urge to trade spontaneously based on your instincts alone without a clearly defined risk-management plan.

• Overtrading

Overtrading comes in two main forms: trading too often in the market and trading too many positions at once. When you trade too often, you always have a position open and are constantly exposed to market risk. When you trade too many positions at once, it eats up your available margin collateral, reducing your cushion against adverse market movements. To avoid these mistakes, focus on opportunities where you think you have an edge and apply a disciplined trade strategy to them.

• Overleveraging

When you trade too large a position size relative to your available margin, even a small market move against you can be enough to cause your position to be liquidated for insufficient margin. To avoid this scenario, don’t base your position size on your maximum available position. Instead, base it on trade-specific factors such as proximity to technical levels or your confidence in the trade setup/signal.

• Not adapting to changing market conditions

Stay flexible with your trading approach by first evaluating overall market conditions in terms of trends or ranges. Use technical analysis to highlight whether range or trending conditions prevail.

• Having unrealistic expectations

Be realistic when setting the parameters of your trading plans by looking at recent market reactions and average trading ranges.

• Not applying risk reward and money management correctly

Risk management is critical to achieving success in the markets. It involves controlling your risk per trade to a level that is tolerable for you.

Conclusion

According to forex expert Carmelo Cerrelli, no matter how long you have been trading on forex markets, you are bound to experience lapses in trading discipline, whether they are brought on by unusual market developments or emotional extremes. So if you start to see any of the above errors in your own trading, it’s probably a good idea to square up, step back from the market, and refocus your concentration and energies on the basic trading rules.