Top 10 ways the new Forex traders lose money
Statistics show that the initial success of the new currency traders are alarmingly low. Over time, a trend that tends to improve, but for many it’s too late. Following the publication of a series of losses, many new traders given to believe that currency trading is simply not for them. It does not have to be.
Forex trading – as any new initiative – has a learning curve. But unlike learning a new skill like learning to play guitar, for example, you are not risking their entire savings while discovering the difference between a major and minor chord. Learn about the currency markets and basic commercial principles only on the basis of trial and error is not a recommended way to obtain the necessary to be a successful Forex trader skills approach.
Most online forex brokers offer a practical version of its trading platform that offers the same experience a live trading application. Typically, when you create a practice account, you are free to negotiate and distribute as you want to risk only money “games” to sow your account.
With a forex demo account, you can see how the market reacts to economic forces, including news events without actually risking their capital investment. However, you should treat this seriously consider if you expect to learn from experience. If you just draw without loss to understand why the loss occurred, then you are wasting your time and prepare for disappointment. Take this unique training tool forex market before you commit your money to a real account forex.
First stop believing all the “get-rich quick” hype still committed by some forex traders. Yes, there are those who get rich forex trading, but some people selling houses are also rich. In any case, it does not happen overnight and it can take years to gain the experience and vision to convert currency trading in a profession full, successful time.
As a new Forex trader, if you get to stay in the game without losing all your money in the first few months, as is all too common – so you can be able to learn what it takes to be profitable. In other words, do not quit your day job yet.
The absence of a solid trading plan
Along with having unreasonable expectations of the risks associated with foreign exchange trading and the amount of time required to succeed, a common mistake made by new operators is the lack of a forex trading plan. Actually there are two aspects of this plan; A general goal for its business activities and a plan for every trade you make.
The overall objective should include coins that it intends to deal with the amount of leverage you want to use, and the time it intends to devote to his business activities. Your plan should also include a realistic rate of return you hope to achieve. In addition to the general objectives of the plan, you also need a plan exit strategy for each trade you make and Commercial upper and lower limits.
In other words, you need to identify the level at which you will close the position and take your winnings (booking of profit taking), or in the case of a losing trade, at what level you are prepared to go before leaving the trade and limit their loss (limit order). We’ll talk more about the instructions stop loss and take-profit later.
Lack of discipline
A plan is only valuable if you really have the patience and discipline to follow it. Although it can be difficult, it is necessary if you expect to be successful, and it is this same reason to develop a plan before the deal is so basic. As rates fluctuate, you can easily get caught up in the market and it is only human nature that you begin to guess their actions. For example, the rate rises above its original point gain, you may be tempted to keep an even higher return; Alternatively, if the price falls below its threshold, but you believe that there is great just around the corner bounce, you may be tempted to keep order open in the hope of an investment.
But is it really make sense any stage? If before entering the trade had good reason to establish both its profit taking and loss limits how likely it is that circumstances have changed so much that they are now ready to launch their earlier assessments by the window in the heat do battle ? Can you be sure that it is not about emotions rather than sound analysis?
Therefore, a plan is so important – it allows you to avoid the emotions that are bound to occur during periods of volatility.
Now this does not mean that a trading plan can never be revised – in fact, should its general objectives retested every few months or even more frequently if necessary. In addition, it may be necessary at times to give up a plan in the middle of trade if market conditions make it necessary, but this should be the exception and not the rule.
And yes, sometimes the market can be so elusive that no amount of planning will yield positive results. In this case, perhaps the best solution is simply not change until you can get a better handle on things. Never fall into the trap of “I have to do something” – sometimes the best plan is to do something.
Instructions Failure to Stop-Loss and Take Profit
When you place a market order, leaving open, ie enter a transaction at market price without instructions to close the order, you are in effect playing with the total value of your account. For this reason, you should consider adding stop-loss instructions for all open positions.
For example, if you have a long GBP / USD position may contain an instruction that automatic stop-loss sell your long position if the speed drops to a certain level. This way you can limit the amount you can lose in any operation, even if you can constantly monitor your account.
The profit-taking orders are the same, making it possible to adjust the speed at which you want to open the closed position to block the benefits. Again, you simply need to identify the rate at which to take profits, and trading system closes the position without further intervention on your part.
Depending on your experience level, trade leverage can be an effective tool to help maximize returns, or may be the cause of his fall. It is not something to be taken seriously, and if you do not understand how, not act works until you understand.
Make too many open trades
Fighter Pilots call “fire helmet” and happens when too much is happening around you too fast for reactions. In the cockpit on a jet fighter, I may be killed – as a Forex trader, you can not end with death, but you will probably end up broke.
Keeping Lost Too Long Positions
One of the things that really separates the experienced forex traders that start, is its ability to determine when a losing trade will not turn the tide. Instead of “hold and wait,” disciplined traders will take the loss and go much faster.
This is another reason to put protective stop in all trades; If effective stop is included when a new exhibition, you can at least limit their losses without having to spend much time “child care” of the order. If the trade hits the stop, you lose the amounts committed, but also protect most of their capital, leaving him with the means to move to something else, which we hope will be more profitable.
Sometimes, you just have to treat these things as life lessons – learn and move on.
Ignoring fluctuations in the distribution of rates and spreads the impact on profitability
The rate differentials change -the difference between the supply and price of windows is essential and directly affect the profitability of each operation. You must be aware that spread differences can fluctuate violently during the day – sometimes to the point of making a profitable trade at one loser.
You must also understand that forex spreads expanded during market hours without once volumes and liquidity is lower. Moreover, spreads tend to widen ahead of important news, such a decision imminent interest rate or recent employment results.
Thinking of the “Great Victory” rather than effective liquidity management (AKA Greed)
This is quite simple – greed; Or rather, how greed can make you get into ridiculous trades. This must be the same gene that makes some people continue to “double down”, even when the odds are so against them, that makes no sense at all. If you want to play, go to Las Vegas.