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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