Avoiding Errors in Forex Trading

By: Sacha Tarkovsky

There are a number of fatal errors that are made by novice traders and here we will outline a few of the most common ones, that see novice traders lose all their money quickly.

Keep in mind around 95% of FOREX traders lose - If you make these errors you will join them.

First let's look at errors traders make when they pick a system to trade.

In part 2 we will cover errors after they have picked the system

Right, let's look at some common errors when choosing a FOREX trading system:

1. Following a guru

Most novice traders try and buy success.

They buy an e-book for $100 or so and think they can win.

Most e-books and systems sold on the net are not worth the money and even worse, will ensure you lose big time.

99% rely on appealing to the greed of the buyer and don't have a real time track record.

If you are not prepared to put in the work to learn the markets don't bother trading, you will lose.

2. Day trading

A fantastic way to lose money and lose it quickly.

Day trading is based upon logic that is just plain stupid, which is:

You can predict volatility in short time frames - You can't, its random.

If you can't predict volatility of course you will lose.

Don't believe me?

Ask a day trader for a real time track record of profits and you won't get one.

2. Trading on news stories

Many novice traders in online forex trading avidly study news stories.

The internet is awash with news, so why not use all this information to trade?

Well, for novice traders this ends in disaster.

Why?

The markets discount news instantly.

While the stories are convincing, that's all they are stories and the experts you see talking, or writing on TV are not traders, they are just outlining stories.

Follow the news and you will lose.

Also, never mix news stories with technical analysis, you can't combine both!

3. Chasing your tail

Most novice traders buy systems from someone else and never come up with their own.

They therefore don't have confidence in the system and every time it loses, they swap to another system and so on.

They simply don't have confidence to follow a system and be disciplined in the face of losses.

Chopping and changing systems will lose you money.

4. Using the wrong knowledge

Many novice traders work hard, but they actually put hard work into the wrong areas.

When devising systems they figure the more elements they combine the more successful it will be, after all 10 indicators must be better than 2 - TOTALLY Wrong.

The best systems are simple and only combine a few indicators.

If you combine too many then there are many elements to break.

It's a fact complicated systems do NOT work as well as simple ones.

The above are common errors when choosing a system to trade and the people who make these errors fall into these categories:

1. Lazy traders - Who think they can make money from someone else.

2. Its easy traders - They think it's easy and they don't have to put to much effort in.

3. More is better traders - They work hard but don't work smart in the areas that matter.

Keep in mind 95% of traders lose and to win takes using the right knowledge and devising a robust system that can make profits longer term and preserve capital, we will look at this in more detail in part 2 of this article.

Foreign Exchange
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