1. Trade Pairs, Not Currencies: Like any relationship, you have to know both sides. Success or failure in Forex trading depends upon being right about both currencies and how they impact one another, not just one.
2. Knowledge is Power: When starting out trading Forex online, it is essential that you understand the basics of this market if you want to make the most of your investments. The main Forex influencer is global news and events. For example, say an ECB statement is released on European interest rates that typically will cause a flurry of activity. Most newcomers react violently to news like this and close their positions and subsequently miss out on some of the best trading opportunities by waiting until the market calms down. The potential in the Forex market is in the volatility, not in its tranquility.
3. Unambitious Trading: Many new traders will place very tight orders in order to take very small profits. This is not a sustainable approach because although you may be profitable in the short run (if you are lucky), you risk losing in the longer term as you have to recover the difference between the bid and the ask price before you can make any profit and this is much more difficult when you make small trades than when you make larger ones.
4. Over-cautious Trading: Like the trader who tries to take small incremental profits all the time, the trader who places tight stop losses with a retail Forex broker is doomed. As we stated above, you have to give your position a fair chance to demonstrate its ability to produce. If you don't place reasonable stop losses that
Forex Gladiator: The Forex System That Fights For A Living Juan Saton
allow your trade to do so, you will always end up undercutting yourself and losing a small piece of your deposit with every trade.
5. Independence: If you are new to Forex, you will either decide to trade your own money or to have a broker trade it for you. So far, so good. But your risk of losing increases exponentially if you do either of these two things: - Interfere with what your broker is doing on your behalf (as his strategy might require a long gestation period) - Seek advice from too many sources - multiple inputs will only result in multiple losses. Take a position, ride with it and then analyze the outcome - by yourself, for yourself.
6. Tiny Margins: Margin trading is one of the biggest advantages in trading Forex as it allows you to trade amounts far larger than the total of your deposits. However, it can also be dangerous to novice traders as it can appeal to the greed factor that destroys many Forex traders. The best guideline is to increase your leverage in line with your experience and success.
7. No Strategy: The aim of making money is not a trading strategy. A strategy is your map for how you plan to make money. Your strategy details the approach you are going to take, which currencies you are going to trade and how you will manage your risk. Without a strategy, you may become one of the 90% of new traders that lose their money.
8. Trading Off-Peak Hours: Professional FX traders, option traders, and hedge funds posses a huge advantage over small retail traders during off-peak hours (between 2200 CET and 1000 CET) as they can hedge their positions and move them around when there is far small trade volume is going through (meaning their risk is smaller). The best advice for trading during off peak hours is simple - don't.
9. The Only Way is Up/Down: When the market is on its way up, the market is on its way up. When the market is going down, the market is going down. That's it. There are many systems that analyze past trends, but none that can accurately predict the
Forex Gladiator: The Forex System That Fights For A Living Juan Saton
future. But if you acknowledge to yourself that all that is happening at any time is that the market is simply moving, you'll be amazed at how hard it is to blame anyone else.
10. Trade on the News: Most of the really big market moves occur around news time. Trading volume is high and the moves are significant; this means there is no better time to trade than when news is released. This is when the big players adjust their positions and prices change resulting in a serious currency flow.
11. Exiting Trades: If you place a trade and it's not working out for you, get out. Don't compound your mistake by staying in and hoping for a reversal. If you're in a winning trade, don't talk yourself out of the position because you're bored or want to relieve stress; stress is a natural part of trading; get used to it.
12. Don't Trade Too Short-term: If you are aiming to make less than 20 points profit, don't undertake the trade. The spread you are trading on will make the odds against you far too high.
13. Don't Be Smart: The most successful traders I know keep their trading simple. They don't analyze all day or research historical trends and track web logs and their results are excellent.
14. Tops and Bottoms: There are no real "bargains" in trading foreign exchange. Trade in the direction the price is going in and you're results will be almost guaranteed to improve.
15. Ignoring the Technical s: Understanding whether the market is over-extended long or short is a key indicator of price action. Spikes occur in the market when it is moving all one way.
16. Emotional Trading: Without that all-important strategy, you're trades essentially are thoughts only and thoughts are emotions and a very poor foundation for trading. When most of us are upset and emotional, we don't tend to make the wisest decisions. Don't let your emotions sway you.
17. Confidence: Confidence comes from successful trading. If you lose money early in your trading career it's very difficult to regain it; the trick is not to go off half-cocked; learn the business before you trade. Remember, knowledge is power.
Top 7 Mistakes Beginners Make When Forex Day Trading Online
Learning to master Forex day trading online for someone who has no background in the financial markets can be intimidating. Generally, much patience and time are needed. However, by looking at the most common mistakes we can at least shorten the learning curve and get past the first few hurdles as quickly and painlessly as possible. The financial rewards once the skills are learned are certainly worth it!
1. Thinking they can generate huge amounts of money in a short time. This is not a get-rich-quick scheme. An individual approaching day trading online with that mindset best look somewhere else.
2. Going by gut feeling instead of calmly assessing market conditions using technical indicators and selecting high probability trades.
3. Chasing the market. A typical scenario: The new trader feels certain price is going up so puts in a long position. Unexpectedly price pulls back. The new trader gets nervous and doesn’t want to lose too heavily so comes out with a 15 pip loss. Shortly after that price resumes the uptrend. The new trader thinks, “I was right in the first place” and puts in a second long position to try and make up for the 15 pip loss and make a profit on top. Low and behold, price doesn’t go where the new trader was expecting, pulls back, and takes out the position at a 25 pip loss.
Score for the day: -40 pips.
Chasing the market is one of the surest ways to blow your account.
4. Lack of thorough preparation before the start of a new trading session. It is crucial a trader examines the charts from a higher time frame down to a small time frame (e.g. weekly, daily, 4 hour, 1 hour) to pick up significant candle or chart patterns and understand the direction of the overall trend. Additionally, consulting the daily calendar for Fundamental Announcements will ensure the trader is not caught off-guard by sudden market moves at news time.
5. Poor or non-existent equity management. New traders often fail to educate themselves on how much they can risk on any one trade according to how much capital they have in their account. Many are tempted to trade multiple lots far too early only to get wiped out. Multiple lots can result in big profits. They can also eat you alive when a trade goes against you. Only strict, almost paranoid,
Tight equity management will ensure the account survives and grows.
6. Floating from one system to the next, trying indicator after indicator, becoming a ‘jack of all trades, but master of none.’ Find a proven system that fits with your trading personality and style and stick with it until you make it work for you.
7. Thinking they can learn by themselves, find the secret code and ‘crack the system.’ Most successful traders learned from someone who is already a professional successful trader, preferably with years of experience. It is so important to have a mentor or tutoring program to get up to speed more quickly.
1. Thinking they can generate huge amounts of money in a short time. This is not a get-rich-quick scheme. An individual approaching day trading online with that mindset best look somewhere else.
2. Going by gut feeling instead of calmly assessing market conditions using technical indicators and selecting high probability trades.
3. Chasing the market. A typical scenario: The new trader feels certain price is going up so puts in a long position. Unexpectedly price pulls back. The new trader gets nervous and doesn’t want to lose too heavily so comes out with a 15 pip loss. Shortly after that price resumes the uptrend. The new trader thinks, “I was right in the first place” and puts in a second long position to try and make up for the 15 pip loss and make a profit on top. Low and behold, price doesn’t go where the new trader was expecting, pulls back, and takes out the position at a 25 pip loss.
Score for the day: -40 pips.
Chasing the market is one of the surest ways to blow your account.
4. Lack of thorough preparation before the start of a new trading session. It is crucial a trader examines the charts from a higher time frame down to a small time frame (e.g. weekly, daily, 4 hour, 1 hour) to pick up significant candle or chart patterns and understand the direction of the overall trend. Additionally, consulting the daily calendar for Fundamental Announcements will ensure the trader is not caught off-guard by sudden market moves at news time.
5. Poor or non-existent equity management. New traders often fail to educate themselves on how much they can risk on any one trade according to how much capital they have in their account. Many are tempted to trade multiple lots far too early only to get wiped out. Multiple lots can result in big profits. They can also eat you alive when a trade goes against you. Only strict, almost paranoid,
Tight equity management will ensure the account survives and grows.
6. Floating from one system to the next, trying indicator after indicator, becoming a ‘jack of all trades, but master of none.’ Find a proven system that fits with your trading personality and style and stick with it until you make it work for you.
7. Thinking they can learn by themselves, find the secret code and ‘crack the system.’ Most successful traders learned from someone who is already a professional successful trader, preferably with years of experience. It is so important to have a mentor or tutoring program to get up to speed more quickly.
Psychology of Trading
Trade with a DISCIPLINED
Plan The problem with many traders is that they take shopping more seriously than trading. The average shopper would not spend $400 without serious research and examination of the product he is about to purchase, yet the average trader would make a trade that could easily cost him $400 based on little more than a “feeling” or “hunch.” Be sure that you have a plan in place BEFORE you start to trade. The plan must include stop and limit levels for the trade, as your analysis should encompass the expected downside as well as the expected upside.
Cut Your Losses Early and Let Your Profits Run
This simple concept is one of the most difficult to implement and is the cause of most traders demise. Most traders violate their predetermined plan and take their profits before reaching their profit target because they feel uncomfortable sitting on a profitable position. These same people will easily sit on losing positions, allowing the market to move against them for hundreds of points in hopes that the market will come back. In addition, traders who have had their stops hit a few times only to see the market go back in their favor once they are out, are quick to remove stops from their trading on the belief that this will always be the case. Stops are there to be hit, and to stop you from losing more then a predetermined amount! The mistaken belief is that every trade should be profitable. If you can get 3 out of 6
trades to be profitable then you are doing well. How then do you make money with only half of your trades being winners? You simply allow your profits on the winners to run and make sure that your losses are minimal.
Do Not Marry Your Trades
The reason trading with a plan is the #1 tip is because most objective analysis is done before the trade is executed. Once a trader is in a position he/she tends to analyze the market differently in the “hopes” that the market will move in a favorable direction rather than objectively looking at the changing factors that may have turned against your original analysis. This is especially true of losses. Traders with a losing position tend to marry their position, which causes them to disregard
the fact that all signs point towards continued losses.
Do Not Bet The Farm
Do not over trade. One of the most common mistakes that traders make is leveraging their account too high by trading much larger sizes than their account should prudently trade. Leverage is a double-edged sword. Just because one lot (100,000 units) of currency only requires $1000 as a minimum margin deposit, it does not mean that a trader with $5000 in his account should be able to trade 5 lots. One lot is $100,000 and should be treated as a$100,000 investment and not the $1000 put up as margin. Most traders analyze the charts correctly and place sensible trades, yet they tend to over leverage themselves. As a consequence of this, they are often forced to exit a position at the wrong time. A good rule of thumb is to never use more than 10% of your account at any given time.
Plan The problem with many traders is that they take shopping more seriously than trading. The average shopper would not spend $400 without serious research and examination of the product he is about to purchase, yet the average trader would make a trade that could easily cost him $400 based on little more than a “feeling” or “hunch.” Be sure that you have a plan in place BEFORE you start to trade. The plan must include stop and limit levels for the trade, as your analysis should encompass the expected downside as well as the expected upside.
Cut Your Losses Early and Let Your Profits Run
This simple concept is one of the most difficult to implement and is the cause of most traders demise. Most traders violate their predetermined plan and take their profits before reaching their profit target because they feel uncomfortable sitting on a profitable position. These same people will easily sit on losing positions, allowing the market to move against them for hundreds of points in hopes that the market will come back. In addition, traders who have had their stops hit a few times only to see the market go back in their favor once they are out, are quick to remove stops from their trading on the belief that this will always be the case. Stops are there to be hit, and to stop you from losing more then a predetermined amount! The mistaken belief is that every trade should be profitable. If you can get 3 out of 6
trades to be profitable then you are doing well. How then do you make money with only half of your trades being winners? You simply allow your profits on the winners to run and make sure that your losses are minimal.
Do Not Marry Your Trades
The reason trading with a plan is the #1 tip is because most objective analysis is done before the trade is executed. Once a trader is in a position he/she tends to analyze the market differently in the “hopes” that the market will move in a favorable direction rather than objectively looking at the changing factors that may have turned against your original analysis. This is especially true of losses. Traders with a losing position tend to marry their position, which causes them to disregard
the fact that all signs point towards continued losses.
Do Not Bet The Farm
Do not over trade. One of the most common mistakes that traders make is leveraging their account too high by trading much larger sizes than their account should prudently trade. Leverage is a double-edged sword. Just because one lot (100,000 units) of currency only requires $1000 as a minimum margin deposit, it does not mean that a trader with $5000 in his account should be able to trade 5 lots. One lot is $100,000 and should be treated as a$100,000 investment and not the $1000 put up as margin. Most traders analyze the charts correctly and place sensible trades, yet they tend to over leverage themselves. As a consequence of this, they are often forced to exit a position at the wrong time. A good rule of thumb is to never use more than 10% of your account at any given time.
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