6 Textbook Mistakes in Forex Trading

Often the obvious is overlooked by so many people: many before them have made these fatal mistakes, yet, they go on and make them again. This just doesn't make sense. There is a well known saying about the definition for stupidity…… keep on doing the same thing, but expecting a different result.

If you are serious about your Forex trading, you should learn from the mistakes of others and make sure you don’t repeat them.

Wrong use and timing for Stop Losses

Stop Losses certainly are important in Forex trading, but using them in the wrong way can also cause you more harm than good. You might be thinking of putting a cork in the money leak, which is fine, but strategy and the right timing is also important. Proper money management should be at the top of your list.

You should be able to determine where to place your stop loss before entering a trade. Once you have placed your stop loss, it shouldn't be moved. You also need to give your trade some “breathing space”.  Traders often lose out on good profits because of trades that are closed to early.

Leverage

Make sure you know exactly how to utilize leverage in a proper and responsible way. You really might be tempted to go for that 400:1 leverage, thinking about that instant profit that is going to come in……or is it going to be an instant loss? Remember; the higher the leverage, the higher the risk. If you start using higher leverage just for the sake of getting those bigger profits faster, you are gambling and you might as well go to the casino. Don’t give in to the excitement of fast money, stick to your strategy. Actually, if you want to trade because you think you will get rich quickly, stop trading. It is not going to happen.

Using signals and indicators

There is nothing wrong with signals and indicators, but remember, that is exactly what they are…..signals and indicators. They are there to assist you and give you clues to enable you to make informed decisions. You first need to have your strategy in place, and then if you want to use an indicator, find one that will fit in with your strategy. If you really want to use an indicator, try to stick to only one that you can really specialize with. Using too many indicators become confusing.

You still need to work. There is no magic formula that you can apply (or plug in) and all the work will be done for you.

Day Trading

You might think that day trading is more profitable and holds fewer risks. This might be true for some traders, but first start trading on a demo account to find out whether you will be successful with day trading. Day trading often ends up in over-trading if you don’t know what you are doing and will only eat away at your profits. Trading less often, analyzing the markets, knowing exactly what you are looking for before you enter into a trade, often ends up to be more profitable and far less stressful.

Using “Miracle Software”

There are so many software programs and trading robots out there that promise huge profits. You supposedly just plug it in and watch the profits come in. I cannot say there is nothing out there that doesn't work but, I haven’t seen it yet and secondly there is no software out here that is foolproof. Once again I am sorry to say, but you will have to do the work.

Emotions

To become an expert trader, you will need discipline, objectivity, calmness and clear thinking to enable you to make sound decisions. If you allow fear to get hold of you, forget about profit. Become reckless, and you will lose your money sooner than you think.

Educate yourself about Forex trading and prepare yourself. Get your strategy in place and stick to it. Don‘t become obsessive about Forex trading. Study other traders, follow and copy what the experts do. When you pick up on mistakes made by other traders, make a note of it and don’t make those same mistakes.

Let Us All Learn From Mistakes

How about you? What mistakes have you made yet? Share it with us and let us discuss it in the comments below. This way everybody can learn from one another.

Why Some People Almost Always Make Money with Forex Trading

What is the secret of traders who consistently make money with Forex trading? Is it something anybody can learn?

Yes, you can learn how to make consistent profits in Forex trading.

The first thing you need to realize is that you don’t always need to be right. It is unavoidable that you will have some losing trades as well. To consistently make money in Forex trading, will require a series of trades over time. With a proper trading plan and lots of discipline, you can consistently show more profits than losses.

How To Make Consistent Profits in Forex Trading.

It is important to create a proper trading plan and put it in writing. It is very easy to put it off by saying…”I will do it eventually”. This kind of thinking will cost you and you might end up blowing out your entire trading account.

Trading in the Forex market needs discipline. Having a trading plan will prevent over analyzing, over-trading, or emotional and impulsive trading. Once you have your trading strategy in place, and your written trading plan in front of you, you have something physical to remind you of exactly what you need to do, and when you need to do it. It will help you to know exactly what you are looking for before you enter the market, and when to exit the market.

3 Ways To Know What Is Happening In The Markets.

·         Fundamental Analyses is analyzing economic, racial and political forces that affect the supply and demand of an asset. In short, you need to be able to use these factors to determine whether a country’s economy is good or bad. You have to understand how an event like unemployment affects a country’s economy, and ultimately, the level of demand for its currency. You need to determine whether a country’s current or future economic outlook is good. If so, it would be wise to buy into that particular currency.

·         Technical Analyses is the framework in which price movement is studied. Technical analysts use charts, which make it easy to visualize historical data. Technical analyses can be very effective for looking at supply and demand levels.  While fundamental analyses are important in assisting you when making trading decisions, many traders feel that being overly absorbed in news events can be stressful and is unnecessary. Although fundamentals will prepare you for what to expect, price action (which will be found through technical analyses), will tell you exactly what the price is actually doing in the present. This is by no means a guarantee that you will never have any losing trades though. No trader can say that he/she never has any losing trades, so make peace with the idea.

·         Sentiment Analyses will give you an indication about what all traders feel about the market. Price should theoretically reflect all market information, but unfortunately it’s not that simple. If you believe that the trend on the British Pound is moving up (bullish), but the sentiment is bearish (moving down), and the uptrend eventually comes to an end and start moving down, you will have no impact on the market. You, as an individual CANNOT MOVE THE MARKET. That is why it is always a good idea to keep an eye on the market sentiment when trading.

Are You Making These 2 Mistakes when Trading In The Forex Markets?

·         Over-trading: If you have a proper trading plan in place, you shouldn't be over-trading (if you stick to your plan). Many traders make the mistake of thinking that the more you trade, the more profit you will make. This is not always true. More trades can also mean smaller profits and more losses. To prevent yourself from over-trading, you need to get your emotions out of the way. This can be achieved by:

o   Creating that trading plan. As mentioned before, by having that trading plan in front of you, you will know in advance exactly what you are looking for and what you need to do when you find it. This will prevent you from “jumping into trades” impulsively and losing money because you didn't know what you were doing.

o   When you had a winning trade, don’t get all hyped up about it and again just “jump into the next trade” because you are on a winning streak. Relax (even take a break and stop trading until tomorrow if need be), then calmly come back and proceed with your strategy and trading plan, looking for the next signal.

o   When you had a losing trade, don’t get all emotional and worked up about it. It happened, get over it. Many traders get nervous and jump into the next trade aggressively, sometimes even increasing the size of their trades because they want to make up for the losses. This is a sure way to end up with even more losses. Take a break. Walk away and come back when you have calmed down. Then calmly continue with your trading plan, which should include a good risk/reward ratio, and you should be on your way to profit over a series of trades, in spite of some losing trades.

·         Moving Stop Losses: After studying your charts (preferably your higher time frames, such as hourly, four-hourly, and daily charts), choose a logical place to put your stop loss. You should feel safe that once you have entered your trade, the market shouldn't easily move against you beyond the point of your stop loss (so be careful not to put it too close to you entry level). But, if the market does change direction and start moving against you, DO NOT MOVE YOUR STOP LOSS. If the market takes you out, so be it. Accept the fact and move on by starting to plan and look for the next trade according to your trading plan. The moment you start moving your stop loss you are increasing your risk, and the further you move away the harder it becomes to recover. This is going against your trading plan which now will become of no value. There is no sense in applying a stop loss if you keep moving them.

What Is Your Secret To Consistently Make Money In Forex Trading?

Let’s talk about it in the comments below.     

Plan For Success

All successful traders will tell you the same thing: a good trading plan is essential if you want success when trading in the Forex Market. Any business would need a well thought-out plan to achieve success in the long term. You should treat your trading in the Forex Market exactly the same…..as a business, because that is exactly what it is. In this article I am going to talk about some basic guide lines you need to consider when you create your trading plan.

Don’t make the mistake of just jotting down some quick, vague ideas on a piece of paper which is based on something you read somewhere. The Forex Market is complex and you will wipe out your trading account sooner than you think. Your trading plan must be well structured. Do some self examination and do proper research on the markets. Consider your personality. Would enjoy to trade currencies, or would you rather trade stocks or indices? Know the answer to these questions before you start trading. It will mean the difference between profits or losses.

So, how do you create a trading plan? Where do you start? Start from the bottom up. Start by taking stock of yourself. What is your personality like? What are your interests? What are you aiming for and what are your goals? Once you have determined your goals, your trading plan should assist you to achieve them. Be specific. Financial security might be your goal, but that is too vague. Everybody wants financial security. Setting weekly profit and loss margins would be a good start. Then move on to set monthly and then yearly goals. Continue until you can say exactly what you want achieve in at least the next five years. Setting goals in this way will give you something to aim for, and checking off some mile post goals along the way will help you to monitor your progress. Although it is good to stretch yourself, don’t aim too high in the beginning. If your goals are unrealistic, it might end up in disappointment.

Next would be proper research about the markets. What are you going to be trading? Are you going to trade currency pairs, stocks or indices? Choose something that will be of interest to you. If you enjoy what you do, it will never feel like work. Don’t start off with too many markets all at once. If you want to trade currencies, pick one, two or at the most three currency pairs to trade with. It is much easier to keep your eye on market movements, do your research etc., when you stick to markets you can specialize in. Having two or three markets that you are trading in will enable enough flexibility when one market is not performing well enough; to trade in one of the others. This should also make it easier to achieve your goals.

Finally, you should develop a proper trading strategy. You should also take your personality into consideration here. Are you a low risk trader, looking for those low risk trades, but with sure profits growing steadily over time? Or do you prefer trades with higher risk, bringing in those profits faster? You need to remember though; the “higher risk” says it all. You might end up making some good profits real fast, but the risk of losses might also cause you to end up losing money as well. Personally I prefer to rather be patient, pick my trades after careful planning and monitoring of the markets. This way you often end up making better profits with one trade, than someone who was impatient, did four trades and lost money on three of them.

Those are the basics you need for setting up a trading plan. There are many resources available on the internet to learn more about trading and the Forex Market. Do yourself a favor and do some research before you start trading.

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Introduction To Forex Trading

Maybe you are still new to the idea of Forex Trading, trying to figure out exactly what it is all about and you don’t really know what it means.

What Is Forex Trading?

The foreign exchange market, which is better known as Forex, is the largest financial market in the world. Compared to the New York Stock Exchange with a daily trading volume of about 24 billion dollars, the foreign exchange market is absolutely enormous with a daily trading volume of 5 trillion U.S. dollars. Market players that you will find in this market include organizations such as large banks, multinational companies and even governments.

What is traded on the Forex Market is money. It consists of buying and selling of currencies. It can be confusing, seeing that you’re not buying anything physical.

When you are buying a currency, it is like you are investing in a particular country’s economy. Let’s use the British Pound as an example. If you buy British Pounds, you believe the economy in the U.K. is doing well and will continue doing so for some time. If you were correct, and you sell back to the market, you will be in profit.

When to Trade.

Foreign Exchange is not situated at an exact physical office, but the main trading centres in this market are in New York (U.S.A.), London (U.K.) and Tokyo (Japan). Seeing that the majority of transactions take place in these countries, the Forex Market is active 24 hours per day from Monday to Friday. Trading will start at the beginning of the business day in Japan, and continue until the end of the business day in America on Friday. Therefore it is always good to know when the best time is trading different currencies. It is also good to know that some of these sessions will overlap. For example, during the summer, between 3:00am – 4:00am EDT, the Tokyo session and London session overlap. During both summer and winter from 8:00am - 12:00pm ET, the London session and New York session overlap. This is important to consider, seeing that this will be busy times in the market with the most movement.

Forex Trading For the Masses

Originally, the Forex Market was only intended for huge corporations and banks. Individuals just weren't able to trade on the Forex Market. You would need at least 10 - 50 million dollars in order to be able to invest on the Forex Market. This was until the late 1990’s. However, with the rise of the internet, “retail” traders like us, can now enter the market by opening accounts through online Forex trading firms.

A Last Word.

Although the Forex Market is huge and lucrative, remember that there is still much at stake. A large percentage of currency trading is based on speculation. As a matter of fact, it is estimated at more than 90%.

It is of utmost importance to have a proper trading plan in place, follow a specific trading strategy and to practice discipline.

Get to know your charts, study the markets and then plan your trades. Be patient, and when you see the proper signal, execute your trade.

Familiarize yourself with Forex Trading and get the right educational background before you start trading.