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 Trading forex may look easy to some, but in reality is a very complex job that requires patience, knowledge and self control. Anyone can engage in forex trading, and can even obtain nice profits on the short run, but only those skilled enough will make a constant income from the forex market.
If you want to start trading forex or you are already doing it but without success, you might consider reading about some common mistakes that many traders do, so that you can avoid them. This can save you a lot of money, and can even turn a trader from a losing one to a winner. Here are some of the mistakes that many inexperienced traders do: Opening trades without a strong analysis This one is very common, and makes your trading pure gambling. It is quite common to draw an early conclusion from the charts or some indicators, but you should not start a trade unless you have checked all the possible aspects. Never make a decision from what you discovered on a 1 minute chart without checking the 10 min, 30 min or even hourly charts, to see if it still stands.
Using technical analysis while ignoring fundamental events Many traders rely exclusively on technical analysis to open their positions. While technical analysis alone can help you make many profitable trades, you should not ignore the economic calendar and the ongoing events. You should never open a trade relying on technical date before important economic news is going to be released. Your calculations will turn useless when new economic data is released. Bad or inexistent money management Forex is not only about knowing which way a pair is heading. Money management plays a key role and it’s mandatory for any forex trader. No matter how good a trader is, there will be times when bad luck can cause long negative streaks, and a bad money management can turn your hard earned profits into zero. Make a good plan before starting to trade, and stick to it. One of the most common mistakes related to money management comes after a streak of winning trades, when the novice trader raises the lot size anxious to win big. This is the moment where a losing trade can lose all the money earned in a long positive streak. Lack of patience Many new traders are eager to start trading from the moment they made their first deposit. The enthusiasm is big, and the lack of patience can be very expensive. There are moments on the market when the next moves are very unpredictable, and opening a trade would be a total gamble. You should wait for opportunities to arise instead of throwing your money in the wrong moment. Chasing a loss Hard to close a losing trade and mark the loss? True, but chasing a losing trade can be much worse. Sometimes even the best looking trades can turn into disasters, and what seemed to be a certain winner can turn into a losing trade. While everything seems to indicate that the trade is going to get back, it is still going down. This kind of moments can be very difficult, and can even cause a margin call. This is why you should avoid getting in this situation, and this is very simple. Use a stop loss every time you trade, so that the worst case scenario will not be that dark. In case you lose, at least you lose an expected amount, and not more. Trying to recover what was previously lost (trading on tilt) After a negative streak, the first temptation is to give up your money management strategy and raise the stakes, so that you can recover your loses with a single trade. This would be the shortest way to getting your money back, but the downside is that you could end up losing much more than you can imagine. After negative streaks the best thing to do is to take a break. Don’t trade while you are nervous or on tilt, because your decisions will more likely be wrong. |
