| Learning about the common mistakes new | | | | technical information you will have a much |
| foreign currency (Forex) traders make will | | | | greater chance at being profitable. |
| help you to develop your skills and chances | | | | |
| of being profitable. Here are some common | | | | - Day Trading |
| mistakes and assumptions new traders make: | | | | |
| | | | There are profitable day traders out there. |
| - Misplacing Stops | | | | However, for new traders, trading with the |
| | | | longer term trend will be easier and have a |
| Stops are necessary to avoid disastrous | | | | greater chance of making profits. Longer |
| losses, however poorly positioned stops can | | | | duration trades give the position more time |
| be equally as disastrous. Before placing a | | | | to move in your favor, particularly if the |
| trade the trader should consider the risk to | | | | market is volatile. |
| reward ratio for the trade. The stop should | | | | |
| be set with the traders cash management in | | | | - Blindly Following A System |
| mind and should not be too close or too far | | | | |
| away from the price. Traders should also | | | | There are many Forex systems out there that |
| consider moving their stop as the trade goes | | | | promise miraculous results. But if you start |
| in their favor to lock in profits and reduce | | | | trading one of these systems with no proof |
| potential losses. | | | | that it really works you could find your |
| | | | investment balance quickly reduced to 0. If |
| - Abusing Leverage | | | | you want to use a Forex trading strategy, a |
| | | | sensible approach is to back-test and forward |
| With Forex brokers offering up to 400:1 | | | | test it using software or on paper before |
| leverage, it's easy for new traders to get | | | | putting any real money at risk. |
| carried away with the dream of making fast | | | | |
| profits. When traders use a high amount of | | | | - Underestimating Emotions |
| leverage the returns can be amazing, but when | | | | |
| the trade doesn't work out the result can be | | | | Emotions can have a enormous impact on your |
| catastrophic. Traders should always calculate | | | | Forex trading. Keeping a trade diary will |
| the dollar value of the risk they are taking | | | | help you to understand how your emotions are |
| for each trade and make sure that this is | | | | affecting your trading, you can then learn to |
| suitable for their investment balance. | | | | use them to your advantage. |
| Experienced traders seldom risk more than | | | | |
| 2-3% of their investment balance on any one | | | | - I Back-tested It So It Must Work |
| trade. | | | | |
| | | | An error traders make is to assume a |
| - Placing Technical's On A Pedestal | | | | back-tested strategy will continue to work. |
| | | | Forex markets are always changing and are |
| Technical indicators are good tools that | | | | effected by global and political events. |
| assist traders to make decisions. However | | | | Before you begin to use a back-tested |
| making decisions for trades based solely on | | | | strategy you should consider if it reasonable |
| what the technical indicators are telling us | | | | to assume that the market conditions the |
| can end up in large losses. By considering | | | | strategy has been tested on are likely to be |
| fundamental information together with | | | | similar to market conditions in the future. |