Common mistakes in Forex trading

Common mistakes in Forex trading and how to avoid them

All persons who join the ranks of hordes of traders, certainly make it with the intention of making money. However, only some of them end up being profitable.

What is what hinders so many people achieve success? What are the reasons that differentiate a few to succeed?

This is a list of the most common mistakes committed in Forex traders.

Lack of training

This will be a short point, since it is quite obvious and there isn't much to discuss. Studies and prepare as if it were your last day!

Generally, the more beginners read very few books and articles, little practice with their demo accounts and forget that they are dealing with a profession that may take several years to master. In fact, most novice traders know so little about trading that often they don't know even where to start.

How can I avoid not the mistake obvious and damaging the trading? It's very simple study!. Lee, follows webinars, practiced with a small account. Do whatever it takes. If you don't have time, find your time! You never know when you'll have a moment of revelation or many of these moments need to be consistently profitable.

Failure to follow the trading plan

Surely, throughout your life you've heard hundreds of times the positive effects of having a plan. Operate in the financial markets is no exception and do not have a trading plan is one of the common errors committed of Forex traders.

Possibly the reason for this error is the lack of a clear understanding on how it has to be a good trading plan.

A trading plan is a strict set of rules, half of which come from the own trading strategy and other money management policy. Then it is possible to supplement the plan with all the points that the operator considers necessary.

A trading plan is very similar to a list of things that should not be done to the be drunk among which we can find: not lead, not call your ex, don't climb high structures and not make stupid bets that make that the police arrest you, as running naked on the street. Each person has their own list of things to avoid in life, so we recommend to also do the same with the trading.

This is an example of a trading plan:

● specific market conditions to open an operation

● The amount of money to risk in an operation

● specific market conditions to exit if you make a mistake (stop-loss)

● specific market conditions to exit if you got it (take profit)

● approximate time so the market to reach the proposed objectives

● Record and takes control of everything!

Write this list in the form of postulates and put it in where you can see her before, during and after operation.

You may think that you don't really need a plan, but this is one of the mistakes that many Forex traders. As Hannibal Smith in "team A", "I love that the plans go well".

Do not follow the policies of Money Management

In the Forex market, things can quickly move since the brokers have much freedom to provide leverage and most beginner traders are left behind in the discipline of managing the money. The combination of these two factors makes the trading risk and dangerous

Then we will detail some questions that you should ask operators to not commit one of the most important mistakes in Forex trading:

● do I am investing only my venture capital? Can (do I afford to lose this money?).

● What is the maximum percentage of my total investment which I am willing to lose in one operation?

● What is the maximum number of operations that I can open simultaneously?

● What is the profit/loss ratio that promises to my strategy?

● does meet my risk/benefit ratio for operation?

A small observation with regard to the last point. Here is when money management policy can be complicated, since it depends on the strategy. In some cases, it is best to have a strategy that promises a potential loss of $1,000 and a probable gain of $500 in 8 of every 10 operations. However, it is sometimes more convenient to have a strategy that promises to a loss of $500 and a gain of $1,000 but running 2 of every 5 times.

Set goals wrong 

What is the best approach to do trading, do things the right way, even if it means potentially earning less money, or doing things in any way whenever there is the possibility of more money This is a difficult question, since the healthier both for the operator and for the balance of your account is not thinking at all about money. If money is the only goal of the operator, especially in the initial stages of your trading career, this will be the reason for its failure over time.

This approach makes the traders to break their own rules, your trading plan. In some exceptional cases, breaking rules can bring greater benefits, although however, usually this long term this always ends with the balance of the account.

Usually this problem generally occurs in the following ways: operating excessively and in belaboring.

Operate in excess, is one of the mistakes that many Forex traders. Normally this error may be due to insufficient capitalisation that makes the operator to use too loud compared to the balance of your account. This error can also occur by an addiction to trading which requires the person to operate too.

Let's start with insufficient capitalization.

Trading in Forex is done in accounts with a high leverage. This without money enough, only increases the chances of failure. As mentioned in the article in money management, an operator always must decide in advance how much money are willing to risk on each operation. What about the traders which succeed? How much to risk? They use 100%, 50% or even 10% of the balance of your account on each operation? None of these options. Operators of success only using 1% being 2% maximum limit which can be reached. What is the amount of capital risk while combining all operations that have open? Between 5% and 7%. A policy of careful money management can allow you to make some mistakes, which are inevitable during the learning process.

Well, then how much is it enough? Let us see this example:

Operating with a microlote or 0.01 lots (i.e. 1,000 units of the currency), this being the volume of minimal trading which allows the broker, you would need at least one investment of $1,000 in an account with a leverage of 1:100 to open a single order. For this position you can not set a stop-loss greater than the 50 or 60 pips, since you comprometerías between 5% and 7% of the total capital. And we are talking about a stop-loss fixed, not of one mind, since normally when the price reaches the level of stop-loss mental, the trader starts to cabals modifying decisions, deviating further from the established trading plan. Never do turn of the trading plan!

How to avoid the insufficient capitalization without breaking the rule of capital risk? Save money! You can do it. Warren Buffett saved about $10,000 during college, doing various jobs that didn't pay too. This served to Buffett, even without the great advantage of having a leverage of 1:100.

Second problem of excess trading - trading addiction.

Operate in the financial markets, especially in short time intervals, can be a very exciting activity. When the market moves, money begins to arrive in real time, which can undoubtedly be an exciting experience. It is almost as if the market wanted to people to operate on it. However, you don't need to allow this illusion to dominate your trading. You have a plan to follow, remember?

Pursue the money can have negative effects. It is possible that operators to divert is a bit of its strategy to enter and exit the market when they should be quiet and patients. In excess is a problem coming from the hand of operate in excess.

Possibly one of the worst mistakes of Forex traders is to think that they have control over the market and the truth is, not without it. Trading successfully seems far to fish, since the fisherman actually has no control over the fish. There is not much that can be done until the fish trap bait. Once this happens, it acts. Once the price of the market is where you want, it operates. If not given this time, all you can do is wait. Your strategy says exactly what are the market conditions that you must wait. If you can not see such conditions, it means that they have simply not given. This does not indicate that you missed these operations and that you should look for them at lower speeds or that there is a problem with your strategy. As soon as you start to think about expect that there are the right conditions in a market and save money rather than lose it, go you much better.

Confuse the purpose

Perhaps this point can be shocking, but many novices make this mistake. Trading in the financial markets is a business, and most people treat it as a hobby. Confuse the purpose that you want to get involved in the trading is one of the mistakes that should be avoided when operating on Forex.

Firstly, this influences the level of commitment you have with the trading. Second, this defines your attitude toward money that you invest. Remember the entertainment is fun. Businesses are making money.

Trading is not a hobby; It's a job. Poker is a hobby that you can do on Fridays, is fun and perhaps give you some money, although usually it is not so. We must accept that the majority of people who know that they will probably not win since they are only testing your luck while having fun in the process. Regardless of which they lose or win, is money well spent.

In the trading, you invest money to make money, this activity is a business. The fun is not relevant at all. If ever you expect to make money consistently in Forex, it acts as an entrepreneur.

Studying, researching, planning, further plans, take notes of your progress and protect your investment are your best allies. Failure to follow these simple techniques is one of the worst mistakes Forex traders can commit.