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The beginning Forex trader is not the only one prone to these common trading mistakes. Many a frustrated veteran discovers that those initial mistakes can become ingrained habits; habits which impede success and limit profits. Here we will discuss how to identify these mistakes and improve both your trading habits and your profitability.

Unusual market developments or emotional extremes can cause even experienced traders to suffer a lack in either judgment or trading discipline. The key is developing an intuitive understanding of the major pitfalls of trading so you can recognize early on if your discipline is slipping. If you identify any of the following errors, it is best to stop and regroup before committing errors which could cause ever increasing trading losses.

1. Running Losers, Cutting Winners

Two common trading mistakes are holding on to losing positions too long and taking profit on winning trades too soon. By cutting winners too early you may not make as much, but then again you literally can't go broke taking profit. That said, you will deplete your trading capital if you let losers run too long. The key to limiting losses is to follow a risk aware trading plan that always has a stop-loss order, one you stick to no matter what! No one is right all the time, so the sooner you accept that small losses are part of everyday trading, the sooner you'll be able to refocus on spotting winning strategies.

2. Trading Without a Plan

Pursuing a Forex trade without a cohesive plan is like pouring your money away into the gaping maw of a hungry market. If the market moves against you, when do you cut your losses? If the market moves in your favour, when will you take a profit? If you haven't already determined these parameters in advance, you run a high risk of failure. If you haven't answered these vital questions when your mind is calm and clear, what on earth would make you think that you'd come up with the answering strategy under the burden of immense and often crippling pressure that the high emotions of trading can cause?

Resist the urge to trade spontaneously. Consider that kind of risk inconsistent with the mature, sensible, disciplined approach of the successful Forex trader. Have a clearly defined plan of risk management and stick to it. If you have a strong view, by all means go with it, but do the leg work in advance so that you have a workable trading plan that specifies where to enter and exit the market, both a stop-loss and a take-profit.

It's wise to be aware of the increased risk of trading based upon important news and data releases. Use economic and event calendars to identify upcoming event risks, and then factor the data into your trading plan. This may mean pulling out of the market in advance of such events.

3. Trading Without a Stop Loss

Trading without a stop-loss is a recipe for disaster. Trading Forex without a stop loss is how small manageable losses can become devastating wipeouts. You may tell yourself that all will be well, all will work out in time, but it may take a lot more time than your margin collateral can support. Using stop-loss orders is significant part of a well conceived trading plan; one that has specific expectations based on your research and analysis. The stop loss is where your trade strategy is nullified.

4. Moving Stop Loss Orders

Moving a stop-loss order is the first step on the slippery slope to major losses. It's almost the same as trading without one, but even worse, as it reveals a lack of trading discipline necessary to success. If you don't want to take a relatively small loss based n your original stop loss, why would you want to take an even larger loss after you've moved your stop ? Like most people, you'll keep moving your stop to avoid taking an even larger loss till your margin runs out. Successful Forex traders learn early to resist this strange foible of human nature, and keep those stops firmly in place. Move your stop loss in the direction of a winning trade only to lock in profits, and never move your stop loss in the direction of a losing position.

5. Overtrading

Trading too often in the Market: This is a condition that implies there is always something significant going on and that you always know it is. Of course that is not the case, and can never be. Though the Forex markets are volatile, dynamic, they ebb and flow like tides, and it would do well to learn the rhythms and the trends. If you always maintain an open potion in the Forex markets, you expose yourself to market risk. The essence of disciplined trading is to minimize your exposure to unnecessary risk. Focus, instead, on trade opportunities where think you have an edge and apply a disciplined trading strategy. Trade from strength, not vulnerability.

Trading too many positions at once: This scenario assumes you have eyes in the back of your head and are able to analyze multiple trade opportunities and seize them all at once. This is simply not possible and actually minimizes your actual opportunities by consuming your available margin collateral and reducing your cushion against adverse market movements. Trading too many positions at once is almost like donning a blindfold and striking out at a pinata in the hope you might strike home. Focus your energy and resources and make each trade count.

6. Overleveraging

Overleveraging is trading too large a position relative to your available margin. Even a small market move against you can be enough to cause an overleveraged position to be liquidated for insufficient funds. There are no overdrafts in Forex trading! This common error is made more tempting by the generous leverage ratios available with online Forex brokers. Just because the offer 100:1 or 200:1 leverage doesn't mean you have to use it all. Base your position size on trade specific factors such as proximity to technical levels or your confidence in the trade set up/signal. Think how the major world banks have suffered and folded by this trend to abuse margins. Be sensible and you'll gain more profit.

7.Failing to Adapt to Changing Market Conditions

The Forex markets are volatile, dynamic and ever changing, which means your approach must be flexible and open minded. Trends give way to consolidation ranges and breakouts from ranges may lead to new trends. Stay flexible with your trading approach by evaluating overall market conditions in terms of trends or ranges. If a trending move is under way, using a range trading style won't be effective and vise versa. Use technical analysis to highlight whether a range or trending conditions prevail. Stay flexible, as well, with your use of technical indicators. No single indicator will work all of the time, so use a combination of approaches. Trend line analysis, momentum oscillators, candlesticks and chart pattern recognition are particularly effective in spotting trade set ups.

8. Being Unaware of News and Data Events

Even the most veteran Forex traders need to be aware of what's going on and what's forthcoming in the fundamental world. Technical analysis alone is not enough. Perhaps you see a great trade set up in GPD/USD, but the imminent British trade balance report could easily derail this profitable set up. Develop a consistent daily habit of data and event reading as part of your weekly trade routine. The market offers enough wild cards with unscheduled developments, so make sure you have a handle on what's coming up. A forward looking mindset also allows you to anticipate potential data outcomes and market reactions and factor this information into your trading plan.

9. Trading Defensively

Even the most experienced and successful veteran trader knows that no one wins all the time, and we have all experienced losing streaks which can be emotionally disheartening. After a series of losses you may discover that you develop a tendency to trade too defensively, focusing more on avoiding losses than spotting winning trades. This negative approach can only set you up for negative outcomes. At times such as this, it's best to step back from the market, analyse what went wrong with your earlier trades and refocus your energies until you feel positive and confident once more. Train your emotions along with your technical skills to seek opportunity rather than merely reacting to failure.

10. Keeping Realistic Expectations

It's more than likely that you're not going to retire based on the profits of any one single trade. The key is to stay in the game. Be realistic when setting the parameters of your trading plans by looking at recent market reactions and average trading ranges. Avoid holding out for perfection. If the market has achieved 80% of your expected scenario, you can't go wrong locking in some profits. Again, focus on taking consistent profits rather than setting yourself up for failure.

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