Major Mistakes in Forex Trading

by : Monica Hendrix

If you want to trade Forex and win the odds are against you – 95% of traders lose and only 5% succeed. If you want to win at forex trading (and the rewards are huge) then don’t make these 4 trading mistakes.

If you make any of these mistakes you will never achieve long term profitability in forex trading.

1. Predicting Market Movement

This is the one major error almost all new forex traders make and it’s a critical one.

If you try and predict then you are simply hoping or guessing and the market will destroy your equity.

Hoping or guessing is not a way to make money in any business – forex trading included!

For example, traders spot a support level and think it will hold so they buy – what they should do is:

Wait for proof that the level will hold by looking for a change in price momentum that shows prices are moving back up – this is the proof.

Check out and start using momentum indicators in your trading.

2. Using Logic That Does Not Work

Trader’s very often use methods or systems which can never work.

Here are some examples:

Day trading

Is popular but you will NEVER win.

All short term volatility is random - therefore you can’t get the odds in your favour and lose.

The Appliance of Science

Many traders think markets move with scientific accuracy and use cycles or Fibonacci numbers – they don’t work and never will, yet traders still use them.

Obviously they can’t work:

If markets moved to a scientific formula, we could all work out the price in advance and there would be no market.

Two Many Inputs

Many traders try to be too clever and have systems with huge amounts of indicators.

After all, 12 indicators must be better than 2 or 3 – Wrong!

Too many indicators, simply means the system simply breaks in real time trading and are not as robust as simple systems.

The above are just a few examples and there are many more – look them up in our other articles.

3. Poor Money Management

Most novice traders are paranoid about losing - they place stops so close their guaranteed to get stopped out.

On the other hand, when they have a profit they get so excited, they bank it early by moving their stop too quickly!

If you want to make money you have to take meaningful risks to make big rewards.

To do this you must keep your stops outside of normal volatility - if you want to hang onto the big trends, that make the big profits.

4.Lack of Confidence and Discipline

The reason most traders lack this is because they try and buy success.

They think someone can give them success for a few hundred dollars and buy an e-book or system from a vendor.

When the system starts to lose, they have no confidence in it and throw in the towel.

An important vital part of your forex education is:

Only you can give yourself success.

Most systems sold on the net are junk if they were that good the vendor would trade them himself and not bother you for small amounts of money!

You need to build your own system and know how and why it makes profits, have confidence in it and this will give you the discipline to follow it through inevitable losses in the short term and hold on for long term profitability.