A common mistake that traders make is trying to take on too many positions at once.
They believe that a higher number of positions will translate into higher profit. “If I open positions in multiple pairs, one of them will win big.”
Too bad this type of thinking usually leads them to lose big instead.
Sure, it’s tempting to jump on ALL the bandwagon and hit all the meme stocks when your friends, trading heroes, and online trading groups talk about the same 15 assets.
But if you want to maximize your opportunities and skills, you might want to think about being pickier with your trades.
For one thing, opening multiple positions dilutes your capital allocation.
When you’ve done your research and are confident where price is going, wouldn’t you want to put as much as you can risk on the trade?
Don’t undercapitalize a 20% move just because you wanted in on a popular asset that can only grow by 10% in the same time period.
Taking on too many trades also means you’re spending less time and research on each position.
Instead of skimming charts and tweets on eight assets, you could do multiple chart analysis, backtests, and talk to informed sources about where three asset prices could go.
The more information you have and the more scenarios you’ve prepared for, the less likely you are to miss opportunities and make emotional decisions.Finally, having a lot of open trades weakens your focus.
Unless you’re using an AI, you can realistically focus on only a small number of opportunities. Preparing for different market scenarios won’t do a thing for your account if you’re not around to execute the trading plan once they do happen.
At the end of the day, it’s our job as traders to get the maximum yield for the capital that we have.
While being picky with trades won’t guarantee consistent profits, it can definitely minimize losses and hopefully keep you in the forex game long enough to be consistently profitable.