One of the most common mistakes that most new traders do is getting indulged in over trading. It is a common belief that being there for long periods of time in the market improves the chances of success and making more profits in the Foreign exchange market. But only a few know that most traders who are experiencing losses in Forex trade are probably over trading and spending too much time in the market. Most traders often find it difficult to realize that they are over trading their way to severe losses. One must know that Forex trading is a waiting game and not a shopping spree. Trading less frequently will always produce better results and help you establish a long term market standing and profits.
Disadvantages of Overtrading
While full time Forex trading has its fair share of advantages, most experts suggest that one should gain proper experience as a trader before thinking about the Forex market as a full time business. Full time Forex trading might sound lucrative to many, but one must consider the following aspects before jumping into the market.
- Following the market all day is one of the easiest ways to overtrade. Overtrading not only leads to losses but also builds up false hopes in the market. Most new traders think that spending more time in the market might yield them higher profits but instead end up losing their hard earned money despite of spending countless hours in the market.
- Forex market is more about short term trading opportunities and long term opportunities are rare due to the sheer volatility of the market. If you choose to wait for the long term investment opportunities, chances are that you will sooner or later give in to fear and lose your position earlier than expected.
- Losses are frequent in Forex trading and relying entirely on the Forex trade for income can be problematic. Most experienced and successful Foreign exchange traders know that in order to achieve larger gains one has to endure smaller losses. One you get into a losing streak in the Forex market, chances are that you will lose a lot of money and without an additional source of income things might get a bit difficult.
- Overtrading and spending too much time in the market also makes you vulnerable to take unnecessary risks. We all must remember that Forex is a highly lucrative yet fluctuating market and the currency prices keep rising and falling. Forex trading is not about grabbing every trade opportunity but to carefully invest in the one that provides the maximum profits. Most people who overtrade often fall in debts because of using excessive leverage.
It’s A Waiting Game
Just like hunting and fishing, Forex trading is all about waiting for your trade to yield results. Unlike the stock market which is only open for a limited number of hours during the day, Forex market stays open 24 hours. This means you can trade any time you want during any time of the day. Grabbing every trading opportunity might be a good option when trading in stock exchange but can prove disastrous when it comes to Forex. The market might provide you with several opportunities to make profits and especially during a fluctuating market situation it can easily lure you into several unnecessary trades that will either cause small gains or huge losses. Following a set and forget trading mentality is considered to be the best for Forex trading.
Avoid Screen Watching
If you spend more than a couple of hours watching the Forex charts, chances are that you will eventually end up being a trade-aholic. An additive trading behavior provides too much unnecessary information and gives rise to greed which leads you to make foolish trades. Watching the same thing over and over and expecting different results is one of the first few signs of insanity. Trading is all about waiting for the right moment. New traders must remember that in Foreign exchange trading, less is more and one should avoid lingering around too much in the market for long term gains in forex.
Most people find it difficult to face the facts that they might be overtrading and slowly making their way into ruin. Getting too attached to things has always proved disastrous in business and the first thing new Forex traders must learn is to let go. Giving into greed has always spelled disaster for several people in the past and one must act carefully and patiently to make profits in the highly dynamic Forex market.
About the author: Luke Peters is an active forex trader and is a member of several Foreign exchange trading platforms like Cornertrader.ch where one can also avail Forex Tutorials and learn more about forex trading. He likes spending his free time reading various books and other material related to trading, finance, management and marketing and likes to keep up with the latest happenings in the market.