Common Pitfalls that can Plague Forex Traders
Mistakes can keep traders from achieving the investment goals. Following some of the common pitfalls that can plague forex traders:
1. Not Maintaining Trading Discipline
The largest mistake of trader can make is to let emotions control trading decisions. Becoming the successful forex trader means achieving a big win while suffering many smaller losses. Experiencing of many consecutive losses is difficult to handle emotionally and can test a trader’s patience and confidence. Trying to beat the market or giving fear and greed can lead to cutting winners short and letting losing trades run out of control. Conquering emotion is achieved by trading within the well-constructed trading plan that assists in maintaining a trading discipline.
Click on Below Link: Trading Discipline How to Control Your Emotions Best Tips for Forex Traders
2. Trading Without a Plan
Whether one trades forex or any other asset class, the first step in achieving success is to create and follow the trading plan. Failing to plan is planning to fail is an adage that holds true for any trading. The successful trader works within a documented plan that includes risk management rules and specifies the expected return on the investment. Adhering to strategic trading plan can help investors evade some of the most common trading pitfalls if you don’t have a plan, you are selling yourself short in what you can accomplish in the forex market.
3. Failing to Adapt to the Market
Create a plan for every day before the market opens. Conducting scenario analysis and planning the moves and countermoves for every potential market situation can significantly reduce the risk of large, unexpected losses. As the market changes, it presents the new opportunities and trading risks.
The most successful traders adapt to market changes and modify their strategies to conform to them. Successful traders plan for the low probability events and are rarely surprised if they occur. Through an education and adaptation process, they stay ahead of the pack and continuously finding the new and creative ways to profit from the evolving market.
4. Learning through Trial and Error
The most expensive way to learn to trade the currency markets is through trial and error method. Discovering the appropriate trading strategies by learning from your mistakes is not an efficient way to trade the market. Since forex is considerably different from the equity market, a probability of the new traders sustaining account-crippling losses is high. The most efficient way to become the successful currency trader is to access the experience of the successful traders. It can be done through the formal trading education or through a mentor relationship with someone who has a notable track report. One of best ways to perfect skills is to shadow a successful trader, especially when you add hours of study on your own.
5. Having the Unrealistic Expectations
Trading forex is not a get-rich-quick scheme. Becoming proficient enough to accumulate profits is not a sprint it is a marathon. Success requires recurrent efforts to master the strategies involved. Swinging for fences or trying to force the market to provide abnormal returns usually results in traders risk more capital than warranted by the potential profits. For going trade discipline to gamble on unrealistic gains means abandoning risk and money management rules that are designed to prevent market remorse.
6. Money Management and Poor Risk
Traders should put as much focus on the risk management as they do on developing strategy. Some naive individuals will trade without protection and abstain from using the stop losses and similar tactics for fear of being stopped out too early. At any given time, successful traders know precisely how much of the investment capital is at risk and are satisfied that it is appropriate for the projected benefits. As the trading account becomes larger, capital preservation becomes more important. Diversification among trading strategies and currency pairs, in the concert with appropriate position sizing, can insulate a trading account from unfixable losses.
Superior traders will segment the accounts into the separate risk/return tranches, where only a small portion of their account is used for risk trades, and the balance is traded conservatively. That type of asset allocation strategy ensures the low-probability events and broken trades cannot devastate one’s trading account.
Click on Below Link: Entries, Exits, Risk Reward Calculations and Stops