Forex Trading – 10 Common Losing Mistakes That Wipe Out Equity
In forex trading over 90% of traders lose ALL Their money. If you don’t want to join this group and enjoy currency trading success, you need to avoid them all.
Here are the 10 common mistakes forex traders make and how to avoid them:
1. Day Trading
The biggest error made by novice traders is to think that day trading works – it doesn’t.
Because all short term price movements are random.
It is impossible to calculate the odds of where prices will go in such short time frames and the result is a loss of the trader’s equity.
Ever seen a day trading record in real time? Neither have I and you wont because it doesn’t work.
2. Buying Systems From Vendors
Leads on from the above point.
There are plenty of Vendors on the net prepared to sell you their “secrets” for $100 odd dollars – don’t fall for them!
They normally come with hypothetical track records done in hindsight and anyone can make money knowing the closing prices.
The problem is you have to trade not knowing them!
Its obvious most currency trading systems sold are junk and the vendor makes money appealing to greed of the buyer NOT trading the system themselves.
3. Trading off News Stories
There is more news than ever and its all so convincing, the problem is its impossible to trade it.
Because the currency markets discount news instantly and move on future perception so trading news stories is futile.
4. Predicting the market
Another great myth in currency trading is that markets can be predicted with scientific accuracy. Well, if this was true there would be no market, as we would all know the price in advance!
King of the theories is Elliot wave, which claims to be objective and scientific, yet leaves the user to make subjective judgements!
5. Being to subjective
Many traders like to be subjective when executing forex trading signals with their currency trading systems, but this simply allows their emotions to get involved.
They really should use indicators that are objective and have specific rules in their forex trading strategy, but they like to shoot from the hip and lose.
6. Making a system to complicated
Many traders think that the more complicated they make their forex trading system the better; after all 10 indicators must be better than 3 or 4.
In forex trading, it’s a fact that simple systems work best, as they are more robust in the brutal world of trading.
7. Poor Money Management
Most traders have no money management strategy at all.
You need to execute your trading signals, then the hard part begins – preserving your equity and making it grow.
Initial stop placement and how you move them are critical to your success and most traders don’t have a clue about how to do this.
8. Chasing the tail
Many traders have perfectly good trading systems, but cant handle drawdowns, so they simply try a new system.
If of course they had stayed with the system they had in many cases they would have made money, but they lack patience.
9. Poor Discipline
Most traders have heard the word, but have no idea what it is and trade with their emotions involved and lose.
Discipline is based upon knowledge, understanding and confidence and as most traders fail to develop their own forex trading strategy properly (most try and buy success from a vendor) the result is failure.
10. Trading to much
Most traders simply lack patience and trade to much.
This of course goes for the losing day trading crowd, but also a lot of other traders – they try and force the market to give them profits, trade when they shouldn’t and lose.
Most people who trade forex shouldn’t, as they have no chance of winning from the start and will make one, or more of the above 10 mistakes.
If you think you can win at forex trading, ask yourself this simple question.
What is my edge that will enable me to enter the winning minority of traders?
If you don’t know what your edge is – you don’t have one, so get one or forget forex trading.
The good news is:
Everything about forex trading can be specifically learned for those traders willing to put in the time and effort to do so and the rewards are immense.