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Common Mistakes In Forex Trading

When you view the statistics of successful forex trading, it can be pretty depressing. Stats show that only 95% of forex traders are making any money. With so many trading forex, why is this? Here is a look at common mistakes newer (and some seasoned) forex traders make that cause them to lose money.

1. Get Rich Quick mentality. You have probably seen the late night infomercials about how easy and profitable it is to trade forex. Well, it is easy to actually trade, but difficult to trade well. Opening an funding an account can take as little as 24 hours and you can be up and trading. People will open up a broker account, fund it and start trading without knowing what they are doing. A good course of study on the currency pairs and how they tend to work with each other is a must before you start any live trading. You must be educated in forex to trade profitably. You can't just go on gut feeling. Forex trading should be done for the long haul. You are going to have those months where you are not in the positive, but a good trader will have more positive months than negative ones

2. Trading for the wrong reasons. Yes, there is a high associated with making a huge profit from one trade. However, do not treat forex trading like a day at the race track. You should not trade for the excitement of trading. Not to mention that there is a lot of time to be spent just waiting for the correct trade to come along. Also, don't start forex trading because you think it only requires a few minutes a day to make money. Even if you are scalping the market (making small quick trades), it takes time for those trades to develop and some days are just bad days to be sitting there waiting.

3. Not using a

stop loss. This is where emotion comes into play. You should have a clear exit strategy when you enter a trade. Decide how many pips you are looking for and what your loss limit will be. If it is 50 pips, set your stop loss so that you are automatically triggered out of the trade when that many pips are lost. It is too easy for a novice trader to say "Well, it has to start coming back soon, I'll just wait a few more pips" and then end up getting a margin call because they are now down 250 pips waiting for the trade to turn around. Be disciplined and set those stop loss targets. There are always going to be new trades happening.

4. Jumping from strategy to strategy. Strategies take time to develop and time to personalize to your own trading style. That is why a demo account is important to practice. Once you have learned your strategy and how to adapt it to changing conditions - stick with it! New traders will sometimes bounce from one person's strategy to another, without giving any of them a chance to develop. One bad trade does not a bad strategy make.

5. Emotional involvement in your trades. Turning off your emotions is a critical tool in trading forex successfully. Not just the down emotions, but the up emotions as well. Have a strategy to get in and out of trades. Resist the impulse to trade, feeling like you are on a wave of good luck. And conversely - don't keep trading if you are down out of desperation.

Following these tips will help you be part of the 5% of successful traders out there, rather than the majority that do not succeed.

Michael Russell
Your Independent guide to Forex Trading


Written By: Michael Russell




AFP


FXstreet.com The Forex Market


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Reuters India
NEW YORK, March 11 (Reuters) - The dollar barely budgedagainst the euro on Thursday, with trading volatile after a smaller-than-expected US trade deficit ...
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Reuters


Earthtimes (press release)

WORLD FOREX: Dollar At 2-Week High Vs Yen On Asia Stock Rises
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US dollar flat on Taipei FOREX
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Taipei, March 11 (CNA) The US dollar traded flat, ending the day at the previous close of NT$31.847 Thursday on the Taipei Foreign Exchange, apparently as a ...

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US Dollar Forecast Turns Bearish Against Euro, Canadian Dollar
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Corporate FX

Dollar forex trading strategy 'a question of indexes'
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Globe and Mail

FOREX-Dollar rises vs yen as US jobs data boosts optimism
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