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