What Experienced Forex Traders Still Get Wrong?

Forex Trading Experience

We would first like to clarify the meaning of ‘experienced forex traders’ for the benefit of all traders. Gaining experience means experiencing profits, losses, understanding when and why market conditions change, adapting to new market conditions, developing risk management system and self discipline.

Of course there are many more elements that define one’s experience in the Forex market but we find these factors to play a major role in trading. Despite the trading experience many forex traders ten to ‘slip’ in the market, which often ends with tremendous losses and anger of joining the statistics of those that do not make it in the market, ‘hogs’ as they are referred to by Wall Street.

We have gathered for you the top three mistake experienced traders make in the Forex market in an effort to prevent you from repeating these common mistakes that will force you to depart from your invested capital and observe it being swollen by the market.

“I can Never be Wrong”

If you are an experienced trader we are certain you have experienced  a streak of successful trades in the market, earning a decent profit as the currency pairs traded in your predicted direction regardless of the strategy you may or may not have used. As you know one cannot successfully predict the market forever. When the market begins trading against you many will be unwilling to accept the loss.

The first step into the abyss is to modify the protective stop loss order’s location under a false assumption the market must reverse now and trade in your predicted direction. When you discover the market continues to trade against you the losses have increased substantially as increasing the stop loss order’s size means increasing your exposure to the market.

Due to the successful streak you have experienced accepting such a loss is not an option. The second step into the abyss is to increase the stop loss order, which is often accompanied by a new trade in an effort to minimize the losses. As you know the market is unaware of your existence and does not care about your financial situation or your open trades.

When the market continues to advance against you comes the third and final step into the abyss. Many traders will either allow the the market to trigger the stop loss order, incurring a larger loss than initially anticipated or amputate the stop loss order off the board, believing the market will surely reverse now. What will often entangle the trader is the excessive usage of the leverage, which brokers are more than happy to provide.

We are perfectly aware of the emotional difficulties to bypass this obstacle in forex trading. As we elaborated in our forex trading tips for the new trader cold decisions must be made. Before opening the trade you must be willing to accept the loss you have set to yourself via the stop loss order, otherwise you may be forced to battle not only with the market but with your own emotions, which unfortunately extremely difficult to conquer.

“Chasing Your own Tail”

This is the second most common mistake experienced forex traders make as an outcome of a bolstered ego. “Chasing your own tail” occurs mainly but not limited to intraday time frames. The shorter the time frame the greater the possibility of experiencing this event.

Intraday traders that use the 5min and 15min charts have probably experienced this more often than others. This occurs when the trader is stopped out by the market and then witness the price reversing in his or her predicted direction within minutes, the initial instinct is to reclaim the losses from the market.

The trader then re-enters the trade without a solid technical or fundamental logic and on most occasions the market will reach out for the stop loss order. At this stage the trader tends to imagine he or she are in a wrestling ring with the market and will attempt to submit the market into releasing the lost capital. As a ‘precaution’ extremely tight stops are used to ‘minimize’ any losses, which only contribute to the losses that are due to come.

Again, on most occasions the market will paint ‘unbelievable’ spikes that appear to be targeting the trader’s stops. Usually after 6-12 attempts the trader surrenders with a bruised trading account.

To some it may sound entertaining and far-fetched but unfortunately this is a very common mistake traders make. As our followers already know we rarely re-enter the same currency pair if one of our trade alerts is stopped out by the market. If you are unable to control your emotions (the majority are unable to) it is wiser to simply let go of that currency pair and wait for a renewed entry, preferably after some time when you are more relaxed.

“I Have a Shortcut”

At some stage traders will opt for automated trading, commonly known as Expert Advisors (EA’s) on the MetaTrader4 (MT4). We provided a detailed explanation why EA’s are more than likely to malfunction and produce negative results in our ‘Trading Signals: Unveiling the Truth’ article.

Many EA’s in the retail market are inconsistent over the medium term (some times short-term as well) and the only EA’s that are consistent took years to develop and test by the traders themselves and are not up for sale.

The second shortcut is trading signals. At ddmarkets we spend extra time to clarify the technical and/or fundamental strategy behind the trade alerts we issue in an effort to ensure our traders fully understand our decision for taking a long trade or a short trade.

This is done to share with our traders what our decisions are based on, which gives them the ability to dismiss trades that are not align with their technical or fundamental observation of the market and perhaps learn how we conduct our technical or fundamental analysis. We would like to add that for a greater transparency all our trade alerts are documented in trade Alerts and weekly updates sections since May 2014 and may be reviewed by all traders. A summary of all our trades is available in the Trades Performance.

The common forex trading signals consist of an entry price, stop loss and take profit, lacking the logic behind the trading signal. Although some may argue and technical or fundamental reason is not required as long as the trading signals are successful it is nevertheless a way of measuring the forex trading signal provider understanding the market and filter fraudulent providers.

Many experienced traders fell for EA’s that scorched their trading accounts and signals that failed to comply with the presented trades performance. You may have experienced this as well if you have been in the market for some time and we truly hope you have learned a valuable lesson from this.

There are many more mistakes experienced forex traders make but these are defiantly the top three. We hope we have clarified these mistakes so you now have the required knowledge to avoid these obstacles in the Forex market.

Fundamental Analysis

Combining fundamental analysis with technical analysis is rather difficult to exercise successfully. The market fundamentals continuously change and require to trader to be on top of the market at any given time. The most common mistake forex traders tend to make is to deviate from the charts and rely on the market fundamentals.

If executed unsuccessfully, the trader may find himself or herself in an uncomfortable position as he or she witness the stops being triggered by the market The immediate emotional response would be to re-enter the market, which often ends in greater losses than originally anticipated.

Combining fundamental analysis with technical analysis requires years of trading experience and it is for the best to cling on to technical analysis which as not as intensive as fundamental analysis.

Last Updated on June 16, 2021