Forex Strategy Trading Tips: The most frequent Forex Trading Mistake and ways to Avoid It

Being a Forex trader you are going to have to develop many different skills as well as developing reactions to various trading scenarios. Sometimes it's easier said than done. After helping many traders, I have noticed that the majority of them are unsuccessful at Forex strategy trading for the same reason, they over-trade. But exactly how do you know when you're over-trading? Here’s a quick guide that will help you recognize when you're over-trading and how to stop it.

How many strategies are you currently using?

I’ve met individuals that 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 utilize, the less you focus on the market itself. Getting to know the market and your strategy is essential to becoming profitable and consistent, but this really is impossible to do when you've got 3, 5, or 10 different strategies to concentrate on.

How much are you currently risking on every trade?
Focusing on how much you’re risking is way more important than understanding how much you’re going to make. That is why money management is really important. I know of traders move from the losing side to the profitable side simply because they implemented money-management to their trading.

How do you feel when you’re making money?

The most common answer to this question is great, and many people don't realize they've become greedy until it's too late. As humans we have a tendency to get greedy when situations are running smoothly for us. I’ve been there, done that, and the result was not good. When you get greedy you are more likely to act reckless and commit mistakes.

After asking yourself these questions you should have a better understanding of where you are. Over-trading is really as harmful as using a strategy with a low ROI (return on investment). Now let’s focus on how you can prevent yourself from over-trading.
Employ a trading plan: you should know where you are going to exit a trade BEFORE you even enter it. Also, make sure you have a set of rules in place for other trading variables like take profit levels, stop losses, and progressive TPs.
Discover more about your trading style: this is very important because the type of MM (money management) you utilize for one trading style is different than the one you use for another one. If you are a scalper you will probably use small percentages in each trade (0.5% to 2%) as you are taking so many trades. A swing trader might use a bigger percentage like 3% or 4%, it all really is determined by your trading style and Forex strategy you use for Trading. Consequently, learning more about your trading style will help you to be effective as a trader and take better decisions.
I'll be posting more tips on how to avoid over trading on a future article, thank you for reading and happy trading!

Best Regards,

Jay Molinar
Advanced Forex trader & educator