Sunday, March 29, 2015

Common mistakes that cause losses in Forex trading

About 90% of all traders lose money. In Forex trading this number is closer to 95%, which begs the question: Why do traders lose?

Here are the most fatal mistakes that cause traders to lose money:

Lack of a proper trading plan
Surprisingly, many Forex traders do not posses a trading plan when they trade. This is in fact a prerequisite for trading successfully in this highly volatile market. Create a proper plan with a clear definition of your trading goals. Use the appropriate tools to set your entry and exit points as well as your stop loss. This will prevent emotional and guesswork from determining your trading strategy.
Lack of discipline
Although one may have outlined a predetermined proper trading strategy, one must also have the resolve to follow it stringently. Many traders have the habit of discarding their predetermined plan and acting on the spur of the moment. For example, instead of exiting the market at a predetermined point, they decide to use their own arbitrarily determined exit point.
Lack of Money Management
Forex traders forget all too often that proper money management skills are essential for successful trading. Without proper money management, one cannot minimize the losses or maximize the profits of trades. You should trade in accordance with the risk level that is appropriate for the size of your account, since capital preservation is essential for letting one last in Forex trading.
The Forex market often lacks a clear direction. At times, Forex traders may feel that they are missing out on opportunities in the market because they are not trading frequently enough. As such, they begin to make poor trading decisions and overtrade. It is, therefore, crucial that you keep yourself in check and be patient in awaiting a suitable trading opportunity.
Averaging Losses
In the majority of cases, one will tend to lose more when the market continuously moves against you when averaging down. To overcome this fatal strategic error, remind yourself that you should never average a losing position unless it is already accounted for in your predetermined trading plan. By using a predetermined automatic stop loss, you will be able to avoid falling into the above trap.
Trading successfully and profitably in Forex require a tremendous effort on the part of the trader to overcome the aforementioned mistakes, which are made by many Forex traders. One way to avoid these mistakes is to use automated trading systems. This method of trading will actually help traders, both novices and experienced, overcome many of the hurdles detailed above. Please refer to our education section to learn more about automated trading.

1 comment:

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