There are five common
mistakes Forex traders always make. Only those
Forex traders with long standing
experience and great years of practice under their hats
do not make these
mistakes, but most of them learned this the hard way and
did make them or at least
made some of them. This is how common these
five leading mistakes are.
It is very important that you know about
these mistakes so that you
can easily learn how to avoid them. If
you are new to Forex
trading, being aware of these very common
mistakes help you avoid
them entirely.
1.
Having "Bad Psychology" About Forex Trading
Forex trading is very
exciting. The market is quite volatile and, as a
result, there's always a
chance to make big buckets of money. But this
excitement can lead people
astray. You have to "cast a cold eye" on your
trading decisions. Not only getting excited,
but even having traits
that normally enable you
to succeed, such as great drive and ambition,
can cause you to make bad
decisions that may ultimately cost you money instead of make
you money.
You see, you don't control
the markets. You can only make your educated
guesses at the way a
currency pair is going to move and place your
educated bets. But when a
trader gets overly ambitious, driven, or
excited, he begins
subconsciously "forcing" trades. This results in
failure. In Forex trading,
it is a rule than only cooler heads prevail.
2.
Emotional Trading
This is related to the bad
psychology trait, but it's a little
different. Trading on
emotions is more than just trading on excitement or
with too much ambition. Trading on emotion
means that you allow your
emotions to dictate your
decisions. Essentially you are caught up in the
vicious cycle of greed and fear. No successful
trader in Forex makes
decisions based on either
greed or fear. Yes, as a trader you are
"greedy" in the
sense that you want to make as much money as you can.
But a successful trader
never ever breaks away from his calculated strategy
because he wants to make a
killing with one trade. He's got his "pips
plotted out" and he
remains within the confines of his rational,
well-studied strategy. He
does not over-bet and he does not take
out-sized risks.
The successful trader also
does not exit a position too soon because of
fear. He knows that
sometimes he is going to lose money. He creates and
follows a strategy so that
he will win more often than he loses and thus
have net gains. You can't be skittish and
trade the Forex with any
success.
3.
Having Insufficient Funds
New Forex traders love the
fact that Forex accounts can be opened for
very little money as
compared to most other investment accounts. But
while this might seem like
an advantage for a new trader, it is a
double-edged sword and
really not a good idea. The reason for this is
that with only a few
losses taken, the money is all gone. The new
trader, still learning how
to refine her strategy, doesn't have the time
to build up his/her account enough to where h/she
can take a few losses and
still be alright.
Don't open a new Forex
account for the lowest possible amount. Instead,
try to have at least
$10,000 that you can use to open your account. And
never risk more than 5% of
your total account on any one trade. This
gives you margin for
errors while you refine your trading style and
stratagems.
4.
Speaking of Trading Style...
You have to know what your
trading style is. You need prepared
strategies. You cannot
shoot from the hip and be some kind of
"improviser"
when trading the Forex. Your strategic preparation begins
with you knowing your risk
tolerance. If you don't know your personal
risk tolerance, get some
advice about it from other traders or financial
professionals.
You must be totally
comfortable with your own approach to the Forex.
Study the various ideas
and trading styles out there, but don't force
any of them upon yourself.
And you should not be losing sleep over your
risks. Too many traders
just don't understand this.
5.
Not Knowing What You're Doing
In the Forex market,
knowledge is power. Lack of knowledge is financial
death. And remember, a
little learning is a dangerous thing. You want to
have sufficient knowledge before you begin
risking your money.
Practicing on a demo
account, talking to Forex veterans, and reading up
on strategies are all
essentials.
There you have it. Avoid
these five all-too-common Forex errors and you’re sure to
Succeed in trading forex.
As you can see above, I
have completely explained these mistakes and it is left for you to prevent them
in the best possible way you can. Like I mentioned above, if you are new to
forex trading endeavour not to make these mistakes as they are sure ways of
making sure you do not make profits from trading Forex.
Regards
No comments:
Post a Comment