What Is The Second Most Commonly Seen Forex Trading Mistake?

The most commonly seen mistake in Forex trading is that of establishing a set of trading rules and then failing to stick to them because traders let their emotions come into play and allow their hearts, rather than their heads, to rule their trading. It is this very same problem of emotion that also leads to the second most commonly seen mistake in Forex trading - that of doubling up on a losing trade.

If you find yourself in a losing trade then, providing you’ve done your homework and conducted the trade on the basis of your market analysis, the simple fact is that the market has unexpectedly moved against you.

This is something which traders experience every day and is a fact of Forex trading. It happens because, despite the fact that we like to believe that the market is predictable, it is not. It is certainly true that the market will frequently follow a pattern which modern trading tools will pick up, allowing us to trade profitably most of the time. The market however also has a mind of its own and it will frequently catch out even the most seasoned of traders.

When you get into a loss in an open trade it is human nature to feel that this is a temporary situation and that the market will reverse in your favor and turn your loss into a profit. If it did not then it would mean that you would have to admit that you were wrong about the trade and this is something that many of us don’t like doing.

However, human nature will often take you even further and urge you to confirm your original decision and to show your confidence in it. This commonly means doubling up on your losing trade to show your confidence in it. You are also urged into taking this action subconsciously because, once you have proved yourself right, your profit will also be that much greater as the trade recovers from a now low position. Put simply, greed also plays a part at this stage.

Now from time to time you will be lucky and the market will reverse and give you a good profit. Unfortunately however is compounding the error you have already made by doubling up on a losing trade and encourages you to repeat this action the next time you find yourself in a similar situation. In most cases of course your luck doesn’t hold and the next time you try this trick you lose heavily.

You found yourself in a position in which your judgment about a trade was being challenged and you were faced with the possibility of having to admit that you were wrong.

You had done your homework and there was no reason why you should not have opened this trade just as you did. Unfortunately, the market then decided that it was going to take an unexpected turn which you could not reasonably have been expected to predict. You did not make a mistake, but simply experienced the unpredictability of the market which is part and parcel of foreign currency trading.

In most cases the mistakes which most Forex traders make are nothing more than a case of letting emotion rule their trading decisions. As long as you do your homework and stick to your trading rules you won’t go far wrong but, if you permit your emotions creep in and influence your trading, you will find yourself in a growing number of losing trades.

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