Textbook Mistakes in Forex Trading
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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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