Thursday, 19 September 2013



To be a successful forex trader there are certain things you need to do but most importantly there are those things you must avoid at all costs. Anyone who has dealt in forex trading will tell you it is all about psychology. You need to know where problems can arise in your business and be prepared to combat and solve them when they finally do appear. But that’s not enough for you to succeed. There are certain mistakes that will cost your forex business dearly, here are five such mistakes:

Making decisions based on the news 

News definitely influences forex trading immensely but letting it guide your decision making would be a very big mistake. Guessing what the news implies in the forex market is something that you can never be sure about, and you will in most cases think to the opposite of the implications of the news to the market. Stick to your strategies and try and avoid certain news days that might make you want to go against your strategy rules.

Switching between systems 

Jumping from one system to the other is not a good idea. It will only cost you expenses on your trading accounts and credit cards. It’s advisable to stick to a system until you have solid proof that it is failing. It’s only after discovering that a system is failing or is inevitably going to fail that you should jump to another. Sticking to this maxim will ensure you don’t lose money that easy.

Trading on things with negative rewards or risks

It is very risky to trade on something with a negative reward or risk, though at times it might work to one’s advantage, but more often than not they go against a trader. So it is better to stick with what is safe to trade. It’s important to have a strategy or system with a positive reward bearing in mind that it’s very easy to make up for losing runs with just one or two good trades.

Ignoring your trading strategy rules

In every sphere of life it is always hard to abide by rules and regulations especially when things do not seem to be going one’s way, but rules ensure that you have a reason to smile in the long run. During protracted drawdown periods, one may start thinking of many ideas, consequently changing his/her strategies. But different strategies have different outcomes and it is common for an outcome to find a trader completely unaware.

Risking more than 1% of your capital on a single trade 

If you risk more than 1% of your capital per trade, you will need to be very strong psychologically to manage the draw-downs that might follow or else you will lose big time. Traders are known not to be impartial when looking at situations where their accounts are down 30% and thus rather than follow their strategy rules they let their emotions rule. It is a risk no professional trader will ever contemplate taking. 

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