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Avoiding Traps In The Forex Market – The Biggest Danger To A Trader

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In terms of fundamental analysis on decision-making how do we avoid market traps? well we have a legendary British American investor and professor here Benjamin Graham. He will give us some fantastic insight through the market, he has a very famous quote “observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities our times of favorable business conditions”.

Another’s indicative of doing your due diligence. As a fundamental analyst and making those well informed decision making, and trades particularly when we are in times of very strong economic boom. A lot of traders simply believe prices will still go up, no matter what the asset they decide to trade, or no matter what the equity they decide to trade. That is not the case, certainly we do our due diligence for each particular fundamental trade, in each particular asset. Our market in question as fundamental analysts, it is essential we focus our decision-making, on all fundamental news affecting the price of the asset. We must never rely on any one variable, and that’s certainly the point we’d like to make there, how do we avoid these necessary and are these very common market traps? Particularly as beginner traders, well a few points to look out for, avoid trading with the dumb money. And this is indicative of actually looking for good trading opportunities as well, but we try and trade with this smart money in reverse. We do not want to be the last person buying a very strong move to the upside, or the last person selling a very honest and weak move to the downside.

So avoid trying to jump in and chase the markets, and obviously that leads on to a second point, being the dumb money. Being the last rat to jump ship when the ship is going down, is not the wisest trading decision. Indeed always protect your trade with the stop-loss. Now we will have plenty of lessons on risk management coupled, protection is absolutely key empowerment to your trading success in terms of avoiding those market traps. Always protect your trade with the stop-loss, do monitor the markets at all times and a key point here is do not become a victim of overconfident analysis. So again relating to the point of the webinar, fundamental analysis and decision making, well obviously we need to monitor the markets and that is one downside. I would certainly say true fundamental analysis, do a lot of research, a lot of due diligence in formulating trading decisions. And because they put a lot of time and research into the market they cannot take a looser way in the market proves them wrong. So do not become a victim of overconfident analysis and always monitor the markets, learn to combine the fundamental decision-making with technical decision-making. That lends itself to always trying to stack the odds in your favour as a fundamental and technical trader, to heighten your probability of successful outcome.


By Keiran

Forex trader, media, marketing, entrepreneur and father

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