AtoZ Markets – Every professional trader analyzes the market trend before entering any trade. It is good to study the data and analyze the market fundamentals, but overdoing it can be a contraindication. Over analysis also often leads to analysis paralysis. Therefore, it becomes essential to know the pros and cons of over-analyzing in Forex trading.
Today, we will shed some light on how over-analyzing can lead to losses in Forex trading. To curb on your losses, you can also read 5 Powerful lessons learned from Forex trading losses.
Factors influencing over-analyzing in Forex trading
It may sound strange to a new Forex trader that over-analyzing leads to more losses than profits. However, one of the causes of over-analyzing is a number of external influences. Financial events, industry news, different comments from the market analysts, online Forex trading educational tools and literature are some of the factors that can lead to over-analyzing the market and in turn put the trader in a confusion. This is known as Analysis Paralysis stage.
These influences can overwhelm traders and can force to rethink on the trading strategy. Sometimes, the losses are so high that many of them blow out their trading account. Moreover, Forex Analysis Paralysis can even end up your trading career. So, don’t let analyzing have upper hands on your trading career.
To be able to overcome your Forex trading fears as well as Analysis Paralysis stage you need to know to become independent. Often the best way to avoid Forex trading mistakes is to learn a set and forget Forex trading method.
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What is Set and Forget Forex trading method?
Set and Forget Forex trading method is following a rule based strategy, which can involve pending orders with predefined exit levels. Ignoring the external influences is the simplest solution for Analysis Paralysis problem. Always concentrate on making your trading strategy as defined as possible. Moreover, follow the Set and Forget Forex trading method. Under this method, you simply need to set the Forex trade and then forget about it for a set time period. Additionally, religiously follow your trading plan and keep in mind that those influences can only hurt your actions. You do not need extra noise! LESS IS MORE!
Statistically, spending less time behind your screen analyzing will give you better results. You will be under less emotional pressure and be in more relaxed state. Therefore, this will make you less likely to overtrade or over-leverage your trading funds.
FUN FACT: 7 out of every 10 traders blow their accounts because of overtrading.
Combine this with a solid risk management strategy you are good to go. You can also use our AtoZForex Lot Calculator as a risk management tool.
Want to trade Forex using Set and Forget trading method with a regulated broker? Open a free account with AtoZ Markets approved forex brokers:
Sample set and forget trading method
One of the best set and forget trading methods I use personally is based on price support and resistance bounces. I'll define the trend first, via ADS. Then I will define possible retracement levels. Possibly, you can use Fibonacci waves or moving averages. Once it is done, I will place limit or stop orders with stop loss and take profit. Then we are done.
How to curb overthinking in Forex trading?
Also, psyching oneself out of a good trade is another problem. The traders feel very bad if they fail to enter a trade that later could have been in their favor. The ultimate reason behind not entering that particular trade was that they thought a lot about it. I know most of the traders pass through this stage once in their trading career. However, the solution is again the same, avoid thinking too much about it. You could have made a mistake too!
You can read more about overthinking and Set and Forget Forex trading method in Top 5 Forex Exit Trade Strategies. In addition, ignorance and fear are the two main factors causing overthinking in the trading world. You should understand the fact that losses are the part of trading. Accept your losses and see them become your practical education. It is better that one accepts this fact as early as possible because then you will have more time to start risk management.
Should you trade Forex using Set and Forget trading method on your own at all?
Before you start trading Set and Forget trading method, you'll want to read this.
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