Avoid These Top 6 Forex Trading Mistakes
Whether you are a newbie in the forex trading business or you have been in it for a very long time, the following six mistakes may sneak their way into your trades. Even though making mistakes is part of learning, it is important to minimize them as much as possible especially when your money is on the line.
One of the forex trading mistakes that most people make is going in the forex market with an idea rather than a plan. When you decide to invest in the forex market, it is important to have clear plan that will help you know the right time to take profit and when to cut losses. Things such as a news event or change in commodity prices may help you make an educated guess concerning the movement that a certain currency is going to take. Only take profits when your idea is right and cut losses when it is wrong.
Another forex trading mistake that most people make is giving up too quick. They usually join the market thinking that they will be able to make huge profits from it really fast, but when they notice that it is not that easy, they choose to quit the market altogether. Just like any other investment vehicle, it is important to keep your expectations low when joining the forex market. You will need to learn how to be patient and take some time to learn to tweak your strategies if you want to be successful in this business. It may not be easy to get rich in a single trade, but if you have a good long-term plan and proper strategies, you will eventually make it.
Some people have the tendency of trading without protection in the forex market. Whenever you take up a position, it should always have a stop loss order built into it. Trading without a stop loss order is like gambling. You do not have an idea whether it will work out or something may go wrong. There may times when the market may move against you, so you will need to decide on how much you will be willing to risk per trade and stick with it.
Another forex trading mistake that is commonly made is over-leveraging. Even though leverage has the potential of taking a few pips in profit and turning it into significant sums of money, it can also cause huge losses or result into you being stopped out of a profitable trade before the trend gets established. Before you leverage a trade, evaluate it and make sure that it stands a high chance of generating returns.
Some people also make the mistake of changing plans on the fly in the forex market. When you start seeing positive results from a trading strategy, there is usually a temptation to bend the rules a bit in order to make more profits. Even though that may work in your favor sometimes, it may also cause you to lose a lot of money.
Last but not least, some traders do not trade in the forex market with discipline. If you want your trades to be profitable, you will need to keep discipline in mind all the time. Have confidence in the system you are using and yourself as well as the discipline to follow through even when the market is recording low points.
There is a ton of information on my website that can help you avoid forex trading mistakes and become a successful trader. Be sure to check it out.
Forex trading mistakes, there numerous ones but here I am going to look at the two most common ones.
The two most common forex mistakes are..
1. Forex Trading Robots Track Records Can Be Trusted
Believing the track records presented with them will bring them profits, when there mostly made up simulations and the system has never been traded!
Seen a track record and think the forex trading system may work for you?
Well read the warning and you will see why they probably won’t!
“CFTC RULE 4.41 – Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown”.
A track record devised knowing the closing prices and in hindsight – well I wouldn’t trust it and neither should you.
Most forex robots rely on clever copy and no one questioning the fact they have never even been traded.
Its sounds great put your feet up, have a Pina Colada and relax in the sun, while your forex trading system (that only cost you a few hundred bucks) makes you thousands a month, alas its not that easy.
Don’t fall for the myth of forex robots – it’s a big forex mistake!
Let’s move on to mistake number 2…
2. You can Make Money Forex scalping or Day Trading
Again another huge mistake is to believe all the people online telling you they can.
Of course they all have simulated track records and you already know how much use they are!
It doesn’t work – all short term volatility is random, you can’t get the odds on your side, so you will lose and this is obvious if you think about it:
Millions of traders, all with different motivations, systems etc come together to make a price and to judge what this vast mass will do in an hour or two is rubbish, you can’t.
Don’t fall for the myth of forex day trading, or you will lose your equity and lose it quickly.
The 2 forex mistakes above are made by traders who are greedy, naïve, lazy or think forex trading is easy. and of course it isn’t, that’s why 95% of traders lose!
Forex trading is hard – but if you have the right mindset and get the right forex education, you can make a great income which in many instances can be life changing.
To enjoy currency trading success, do it on your own.
Get the right forex education and learn forex the right way and you will be well rewarded for your efforts.
The percentage of forex traders making great success is less than 5%, considering the fact that there are so many traders around the world today. This alone can discourage any one planning to start trading forex currencies. Discussed in this article are common mistakes most traders are prone to. These mistakes alone can totally wipe out your forex trading account. Avoid these forex trading mistakes, if you want to be a successful forex trader.
Overnight riches– Some forex vendors come out with infomercials claiming how easy it is to trade the forex and make huge amount of money in a very short period of time. Though forex trading is easy to understand, but the down side is that it requires time, effort and experience to master the skills needed to trade with high precision. The first process needed to start trading a live account is to open a forex trading account with a trading broker. The process of doing that and funding an account can take as little as 24-48 hours. Some newbie traders start trading immediately hoping that they would make over 100% of their initial trading capital. Most times, they end up feeling discouraged when their expectations are cut short by a large streak of losses. Forex trading requires patience. At times you will win and there are times you will lose. The most important thing to take note of is that, your wins should be more than your losses in order to be successful.
Inadequate knowledge- To be successful in forex trading, one needs to know the factors that drive the market. Your number one task as a new trader is to be well informed of the major components that constitute the forex market. Some traders barely know what fundamental analysis is. They blindly execute trades just because they see that the market is moving sharply in a particular direction. Their ignorance causes them to join the 95% of losing traders.
Over trading- This occurs when a trader trades currencies than his trading account can take. This usually happen when a trade have been entered and all along the line another trade set up comes up, in order to win all, a trader executes another trade. At times it could be entering trades after trade. This is a recipe for failure. If one trades like this, it would only take a short period of time for that account to be wiped off.
Not using stop loss- Some traders execute trades without determining where to place their stop loss should the trade go against them. At times, they feel that the market would turn around and move in their favour. Some times, the market will keep going against their trade until it eventually wipes out their trading account. Not using a stop loss is very dangerous. Before you set out to trade, determine how many pips that you will take from the market if it goes in your favour and also how many pips your are willing to risk if it goes against you. When your loss limit is within the ambit of 2% of your trading account, you are bound to remain in the market for a long time.
Moving from one strategy to another- Some traders especially new ones tend to change strategies easily when their initial strategy shows some losses. You can not win in the forex market all the time. There are times when you will win and there are times when you will lose. Sticking to a strategy that has potentials even in spite of temporary losses is the key to success. Successful forex trading strategies take time to develop. You need to discover the winning edge in your strategy and adapt it to your trading style. When you trade a particular strategy for a long period of time, you will discover the pitfalls and advantages that surround it and you can better use that information in your favour. Jumping from one strategy to another makes you lose focus and in the long run, you lose confidence when taking trades.
I hope you gained something from this article and you are willing to avoid these mistakes.