Monday, April 23, 2012

Textbook Mistakes in Forex Trading

Novice and students of forex trading often
overlook the obvious: many before them have
made fatal mistakes. Making the same wrong
decisions all over again just does not make
sense. What a serious forex trader should
do is to learn from them and up their game.

Relearning these assumptions and wrong steps
will increase one's chances of succeeding
in the business. If you are inexperienced,
then the experience of others can only
enrich you.Always remember no to make these
mistakes:

Wrong timing of Stops

While stops are certainly essential in forex
trading,the wrong timing can topple your
whole strategy. Sure, you might be thinking
of putting a cork in your money leak,but the
key to doing that is the right timing: the
trade should still be leaning in your favor.
Proper money management should be at play
here. Risk should be at the minimum before
placing a trade. Calculate and research your
options.

Underestimating the risks of leverages

Okay, you might be thinking of instant profit
if you use a 300:1 leverage on a trade.However,
are you sure profit will come in? A lot of
people think of leverages as free poker chips
where in fact, the risks are higher.It is all
about making sure you have a good solid hand.

Even then, experienced traders are always
careful only risk 2-3% of their investment
balance on a trade.Asses your risks and gains,
do not be dazzled with the money and the
excitement.

Relying on signals and indicators too much

It is as if you are just a sheep following a
trend. Signals and indicators are just that:
assistants and cues that help you make a
decision. Remember that your strategy and
assets are unique to you, so technical
indicators do not always apply to you. You
still need to work. There is no magical
formula or machine that can do the work
for you.

Day trading

Some people might think that day trading
holds no or fewer risks, which may be true
to some. However, there is a reason why long
term trading still holds: it gives you more
time to wait out a position that will be in
your favor, yielding more profits.Day trading
can work, but only to a select few.

Getting sucked in by "miracle" software

There are dozens of so-called powerful platforms
and software that tells you can beat the system
and reap huge profits.Some of them can help but
a lot of them are duds.The main thing to remember
is that there is no sole software out there that
is foolproof. It's okay to get indicators and
advice from a few, but it all rests in your
acumen. Before putting your money where your
program's mouth is, you better test it
thoroughly.

The same thing goes for systems and strategy on
paper. Even if you have back tested it, would
the conditions you have used to test that be
the same conditions that will happen in the
near future?

Getting overwhelmed with emotions

Forex trading requires objectivity,cool
thinking and the ability to make sound
decisions. Be too afraid to risk, and you
will not profit at all. Be too reckless and
you will lose your shirt in no time. Here
is a smart thing to do: read up on forex
trading psychology. Watch yourself and do
not work obsessively. Have a life.

There is a reason why forex trading is so
popular yet only a select few have built their
careers over it.A lot of beginners have failed,
but where they have fallen, you should pick up
and do better.









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