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Forex Money Management Forex Risk Management

When Professionals Run Into Problems With Trading, This Is What They Do…

If somebody told you at the beginning of a professional forex career that you will have to bust many accounts and work for a couple of years to get it right, would you still take that road? Probably not, because in the end, you might not even get to the professional level. A lot depends on you, how much do you love trading and how much do you want to have a job most people dream about. People will settle for less, why is that so is not important, it is more about is that enough for you. At some point on this road, in case you lose a few accounts or run into obstacles, you may fall into a bad mood called desperation. So much was sacrificed only to scrap everything, you might think. Nobody will say this, but it will happen to most of the traders if not all. At any moment in a professional forex trading career, it is a possibility your mindset will take a hit, and here is what professionals have to say about this. 

The Old Problem

People that want to become forex traders do it when they want to get out of their present situation. Forex trading is much more attractive than a day job, at least for ordinary people working for XYZ company from 9 to 5. However, with all the warnings forex trading is only for the most persistent, people go in thinking they are just better than everybody else. Well, even genius traders mess it up, and mistakes are good, better make them early on. 

Desperation comes in when you pay for impatience. Rushing to forex trading just because you need alternative income so you can quit your job or drop out of college is a faster path that hits back at you. Feeling that you are missing a lot if you do not start trading now is a warning you need to take seriously. Before allowing forex to hit you financially, demo trade. Then it might hit you psychologically, your real money is safe at least. Professionals take real losses, and you have to get ready for that first. So patience is a must, you are not going to be ready in a few months and more likely not even for a few years. 

Pro Approach 

Professionals know this “trap” so they do not start panicking when they have a bad month. They play the long game and patiently wait out to see if something is really not aligned with their trading. The right mindset about this would be even when you are losing, it is good. Professionals do not get emotional to the point they lose their trading ability, but actually are very intrigued about what could take their multi-year successful strategy down. It is a great discovery because ironing out the problem makes their strategy even closer to perfection. The result of this research is also very beneficial for understanding the market and to other traders as well. What follows is looking for tools or trading measures that could evade the losses from this market situation. 

FOMO and Risk Fear

Fear Of Missing Out is also one of the most common issues beginners develop but later advanced traders may experience the paradox of “knowing too much”. FOMO is handled by having a strict rule set or a trading system. Some traders count candles until it is too late to enter a trade, some have indicators, but they all have something that prevents them from feeling that fear. There is a simple barrier in the form of a rule. 

When traders love trading they are very well informed, they digest a lot of information from various sources. This can at times affect their trading where they become risk-averse. It is hard to have a decision based on every indicator, news, or other data. Traders have to focus on a set of “decision-makers”. 

One of the ways to redirect the risk fear is gradually entering the position. This could be referred to as the Scaling-in method of money management. Older traders and investors are especially fearful of the new wave that is probably taking over currencies as we know them. We are talking about cryptocurrencies of course, and their intangible form is not really understood. The new age of currencies goes along with the new generations but veteran traders are conservative most of the time. Gold and precious metals are their choices over bitcoin and have this fear of risk (unknown). Scaling in method starting with small amounts is a good way to break this fear, gradually increasing the amount as the trade progresses. Professionals with an open mind do not have problems accepting new markets as long the asset is globally present. 

The New Problem

According to the experiences of pro traders, the journey of ironing your emotions does not easily stop. So if you are a beginner reading this article, be ready for a bumpy ride and do not ever get discouraged. Pro traders have devised a way to combat that deep but mellow feeling they have wasted many years and that they might give up trading. This feeling gets stronger when you become a pro. For clarity, a pro trader is not the one who is trading real money, it is the one who does it for a living, with his or with somebody else’s money. The feeling you are not good at what you are doing gets stronger even though you have reached the level most dream about. After every loss, it reminds you. For some, it could be a bad month after you lose sight of the long play you are actually aiming for. Desperation is there, some traders feel it more, some are more rational. According to pro traders, there is no way around it, the longer you are in trying to trade your way the more you get the feeling all was for nothing. 

The best way to get yourself on track nevertheless is by putting the work early on your strategy, plans, the whole system, and of course psychology. When you have a really tested out system with great results, you have confidence in what you are doing. The reason why pros might get desperate is that even though the system is tested out, the market is changing. Results are changing. 

It could be a motivator to find out new, better trading methods, but it is for the wrong reasons. Fear of failure should be overcome at one point, it seems only time (experience) of generally good results can make you glad you chose to be a professional forex trader. According to experts, if they could take away one thing on their road to ascension, it would be that feeling. Otherwise, it is a great profession. Having an eyeopener such as realizing you will be doing 9 to 5 jobs for most of your life will likely put you on a different track than most people. On this track, not necessarily forex trading, the same feeling will come up. Professional traders make sure they know what they are doing, the same translates to everything else.

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Forex Basics

Problems Everyone Has With Forex (and How To Solve Them)

When it comes to forex trading, every single trade will have its own individual experiences, however, there will also be a lot of things that are similar, simply due to the nature of the markets. Some of those similarities unfortunately will be problems, problems that the majority of traders will experience. Some may see them as problems, others though may not actually class them as a problem, even though they experience them. We are going to be looking at some of the problems that every trader will experience and the different things that you can do to try and get past them.

Too Much Risk

When you are doing anything with your money, there will be risks involved, risks that could result in you potentially losing any money that you have put in, this is certainly the case when it comes to trading forex and this is a problem for many people. Not necessarily the money that you are putting in, but the emotions and stress that the potential losses can cause. Some People are simply not able to handle risk as well as other people, this is known as their risk tolerance. If you have low levels of risk tolerance then you will find it hard when trading, each and every trade that you put on is increasing the risks to your money and each trade can result in a loss. Some people will struggle with this and so they will end up closing trades early or imply not placing them.

What we need to ensure is that we have a proper risk management plan in place, one that will allow us to reduce the risks for each trade and so that we can see exactly what is being risked with each trade. Things like a risk to reward ratio will allow us to plan the maximum amount that we can lose with each trade through the use of stop losses. These will automatically close the trade when it hits a certain point, this way we can reduce and manage the losses that we are going to take. It keeps our account safe and knowing what the potential loss is before we even place the trade can help give people with lower risk tolerance a lot more confidence in their trade and can help to take some of those worries away. So ensure that you have a proper risk management plan in place to help reduce the issue of trading being a risky endeavor.

It Takes Too Much Time

Another thing that a lot of traders coming into the industry do not fully understand is the amount of time that it takes to learn and to actually begin trading. The initial periods can take a lot of your free time, you need to learn the basics, you need to create a trading strategy, you need a risk management plan for that strategy, and more. This can take a lot of time, more than most people expect as some come into it thinking they will set up an account and then trade, you can of course do that but it will ultimately result in loss.

So yes it does take a long time to get ready, however, it doesn’t always stay like that. Once the initial learning has been completed and you have a strategy ready. Depending on the strategy that you have created, they take up different amounts of time when we look at actually placing trades. If you are the sort of person that does not have a lot of free time, then you can create a strategy that only requires you to place trades once a week, this way you do not need to spend a lot of time placing trades. So yes the initial learning and starting out, but once you have passed that stage, it does not actually take too much time to trade itself. Of course, you will be constantly learning more, but that can be done in bitesize chunks.

It’s Hard to Track

Let’s be honest, when you are placing a lot of trades, not many of us think that we have the time to track everything, to write down everything that we are doing and why. One of the things that are thrown at us when we first start trading is the fact that we are supposed to be keeping a trading journal. A journal where we write down everything that we’re doing, the trades, the results, the reasoning behind it. We just don’t have time to do it all or to even keep a track of the trades we have running.

The good news is that it is a lot quicker than you might think, yes it can be a pretty slow process when you first start out, but it speeds up. It now only takes us a few seconds to write down what we are doing and why, our trading platform also shows us most of the information that we need such as the times of trades, the profit and loss, and so forth. It seems like it will take a long time to build the more that you do it, the quicker it becomes. At the start, it may be a hassle, but it really does not take a lot of time at all once you get used to doing it.

You Need A Lot of Money

When it comes to things like investing, you often hear the phrase “You need money to make money”, while to some extent that is true, if you want to make a lot, then you need a larger balance, but you certainly do not need a lot when you are first getting started. In fact, many brokers allow you to join from as little as $10, making it pretty accessible to most people in the world. Those that were once priced out of the markets can now very easily get involved. It will be hard to make much with such a small balance, for that you will need more, but it just shows that you do not need a lot in order to get started and to actually make anything.

Those are just some of the problems that a lot of people run into when they trade forex. There are others, plus there will be problems that are very individual, that only you may experience. What is important to remember, is that things that look difficult or look like they may stop you in your tracks now, may not actually be as big of an issue as you may think and there will always be ways to get around and to solve the problems that you come across.

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Forex Basics

Faux Pas That Are Actually Okay to Make With Your Trading

Much like anything in life, trading offers a lot of variety and so there are a lot of different people doing a lot of different things, meaning that we all have different experiences and abilities. Due to this, there are a lot of things that can be considered a faux pas. Things that traders will look back at as embarrassing, things that they probably would like no one to remember, but these things happen and they happen to all of us. The thing is that a lot of them are actually okay to make, regardless of what others may think. They could potentially benefit you and your trading or at least not have the negative effect that some people may presume. So let’s look at some of the faux pas in trading that are actually ok to make.

Blowing An Account

Let’s be honest, the worst thing that can happen to you as a trader is to have your account blow. Many people believe that this means that you are a bad trader, you do not know how to use proper risk management, you do not know how to trade or you are just bad at it. This is completely untrue. In fact, if you look at any successful trader today, we can almost guarantee that the majority of them would have blown their accounts at some point. The question is though, do you think that they are embarrassed by it? Most likely not.

This is simply due to the reason that it is something that nearly everyone will do, those that do not blow accounts simply have not traded for long enough. It will happen, it’s inevitable and it will most likely happen near the start. It can feel embarrassing but it really shouldn’t be. Instead, the blown account should act as a fantastic learning opportunity. They allow you to see exactly what you did wrong and what you can do to help prevent doing anything similar in the future. There is nothing wrong with a blown account (apart from the lost money) and it certainly does not mean that you are a bad trader. Use them. Learn from them and you will most likely not blow another one in the future and you will end up as a much safer trader in the long run.

Not Understanding Something, or Anything

Forex and trading as a whole can be incredibly complicated. There is so much information out there, far too much for any one person to even think about learning all of. In fact, you probably won’t ever learn more than 2% or 3% of what is out there. Due to this, you should never feel embarrassed that you do not understand something or in fact not understanding anything. We have all been in that situation, especially when we first started out as traders. We didn’t know a thing, everything that we read or watched was confusing, all these new words and meanings that we had never heard before.

So you should not feel embarrassed. Everyone has been in the exact same situation. Instead, you should ask what things mean, you should ask how to do things and you should question things that you do not understand. No one will hold this against you, in fact, the trading community is more often than not a very helpful one. People will be willing to help you to understand, they will explain things and help you to understand. Just know that absolutely every trader has been in the same situation and even those at the top of the game will still come across things that they do not understand, they are not embarrassed by that, and neither should you be.

Becoming Stressed

Stress can get the better of a lot of us. It is an emotion that the majority of traders will go through and is completely natural. If you are feeling stressed, do not try and keep it inside. Instead, you need to take action against it, you need to step away and you need to take breaks. Do not feel bad that you are needing to step away from the terminal because you are feeling a little stressed. We all have to do it at some point as do the world’s best traders. They take breaks because things are getting too tense and so should you.

Forgetting Stop Losses

Stop losses are vital for anyone to be trading in a safe way, but when you do something with every single trade. There will of course be times where you may forget to place them, and of course, the time that you forget is the time where the markets go against you and you lose a much larger chunk of your balance than you were planning for. It happens, you know you should be using them and so you feel embarrassed that you lost a lot more simply because you forgot to place it. Do not worry, use that as a learning experience and as you feel bad about it, it is much less likely that you will do something the same again. You need to learn from this mistake, we still do it from time to time. But each time we do it, there is a long period of time where we never forget to place it. Simply because we are remembering the losses that we took before. So do not feel embarrassed that you forgot the stop loss, just use that feeling as a reminder so you do not forget again in the future.

Not Having Enough Money to Trade

Trading can be expensive. It takes money to make money. At times in our lives, other things may come up, a broken boiler, a broken car or a wedding. These things cost money, and you may need to take money out of or even all of the money out of your account in order to pay for these things. Now you have no money to trade, that is fine. The other parts of your life are more important at that point in time, and the forex markets are not going anywhere. If you need to use your trading funds for things then use them. In the future, when you get more money again you can start to trade again. Do not make your life suffer just because you don’t want to be in a position where you cannot trade.

Those are some of the things that people find embarrassing about their trading or the things that they have done. It is important to remember that these things should not embarrass you. We all go through them and millions of people will go through them in the future too. Use them as learning opportunities or simply talk to others, you will discover just how common they actually are.

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Forex Basics

The Seven Deadly Sins of the Forex Trader

Most of us have heard of the biblical seven deadly sins, but few know about the seven deadly sins of Forex. Part of achieving success is knowing what not to do, and these “sins” work to help you understand and avoid potential problems. Without further adieu, let’s get into it!

Pride

Wow! What a great trading session! There is no one to stop me! Tomorrow I will double my profits! 

Little grasshopper, you’ve had a good day, and yes, you got your positions right, enjoy your joy in moderation, and share with others the reason for those entries, and be aware that tomorrow that euphoria may cloud your vision today. Remember also that the one who calls himself a donkey and who today is crying out, perhaps it will be the genius tomorrow and you will be the one crying out.

Avarice

I’ve achieved my goals, and this looks like it’s going to turn, but there’s another target up there pending, so I’m going to continue with all my positions without partial withdrawal because I’ll gain a lot more.

Small grasshopper, already assures part of your profits, reduces risk situation and leverage, in this way, perhaps you will find opportunity in another market that you can take advantage of.

Sloth

Well, I’ve already won a TrADE today, and although this one I’m looking at now is very clear, I’m going to stOP. tomorrow will be another day.

Little grasshopper, if this new operation is clear, do it! And do it now!, do not leave for tomorrow what you can do today, but not simply by following the proverbs, but because tomorrow may not present you any clear opportunity in the market, And maybe you’ll force an entry of dubious signal, causing you losses in the end.

Gluttony

Today I will catch all of the price movements. Not one will escape me! Today I will recover everything that I’VE lost RECENTLY.

Little grasshopper, that’s called overtrading. It’s not advisable, you’re gonna get obfuscated. You’re gonna spiral into wanting to put a pulse on the market, and this one’s a lot stronger than you.

Envy

Wow! Look at this guy with the big profits. It’s just dumb luck. He has no real idea of how to trade Forex

Little grasshopper, congratulate him and share his joy, get in touch with him, maybe there’s something he can teach you. Keep in mind that trading is not only about skills but also about attitudes.

Lust

look how good that XD directive is! Go all out! I would hit with it XD. Wow, look how good that XD support is! Go all out! I would hit with it XD. (This is a joke, By THE WAY!)

More seriously, after a good run, your worst enemies will be overconfidence and self-confidence that can be lethal in trading, as well as excessive leverage. Minimal risk control and uncontrolled GM management can lead to failure.

Anger

they’ll be cursed! They’ve got me going in all directions. I don’t know where to turn any more! And look how stupid they all are, everyone buying! Do you not see that this has to fall?

Little grasshopper, don’t fight the market, the market must be your friend, listen to him, understand him and everything will go smoothly, be receptive, get in tune with him, and don’t get angry. It won’t lead to anything positive, you’ll only aggravate your lack of control. Enjoy trading. And don’t marry any position, after all, they don’t want you forever either.
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Beginners Forex Education Forex Basics

Top 7 Biggest and Most Embarrassing Forex Blunders

When it comes to forex trading, there are a few factors that can make or break your career. Beginners are very prone to making these mistakes, but even intermediate level traders are susceptible to some of the biggest forex blunders out there. If you’re looking to increase your profit margin while dodging unavoidable mistakes, keep reading. 

Forex Blunder #1: Blindly Trading

When we say refer to blind trading, we mean trading without the proper knowledge needed to make informed decisions. This could stem from opening a trading account too soon without learning all of the components that actually go into trading or failing to keep up with important news and other factors that can affect the forex market. Traders that don’t know what’s happening with the forex market are bound to feel confused and fall behind their colleagues that keep up with world events. Fortunately, you can avoid this mistake by ensuring that you have a proper education and by keeping up with forex news through an economic calendar and other means of acquiring that important information. 

Forex Blunder #2: Risking too Much

From the beginning, forex traders need to work out how much money they can afford to invest in their trading account. From there, it’s crucial to manage that money by deciding how much you are willing to risk on each individual trade and by taking measures to limit your risk, like placing a stop loss. One of the biggest mistakes you can make involves using high leverage amounts, failing to use risk management precautions, and simply risking too much money on each trade. Together, these mistakes can blow through your account balance and leave you feeling defeated, which might even cause you to give up on trading for good. One simple tip is to stick with an average leverage (many experts use a 1:100 ratio) and to risk about 1% of your account balance on each trade. 

Forex Blunder #3: Emotional Trading

Forex trading is often compared to a rollercoaster ride because of the range of emotions that traders can go through. Feelings of anger, frustration, doubt of one’s ability to be a good trader, and panic over the loss of funds are common, especially with traders that don’t have a lot of experience. This leads to irrational decisions and issues like revenge trading, which involves risking too much in an attempt to gain back funds that were lost quickly. Since traders are already feeling the adrenaline and aren’t thinking clearly, these types of measures usually end with even more losses. If this sounds familiar, some of the best tips are to lower the amount you’re risking on each trade so that losses won’t have as much of an impact on you, stick with your trading plan, and take a break when you need to calm down. 

Forex Blunder #4: Choosing the Wrong Broker

There is an overwhelming number of forex brokers out there, each of which offers its own unique conditions and perks. Some traders might not realize just how much goes into choosing a broker, as you need to compare account types, funding methods and fees, leverage options, tradable assets, and more. If you choose the first broker that pops up on your search engine, there’s a good chance that you could have found an option that was better suited for your needs with a little research. It’s also important to know that your choice affects the amount of your profits that wind up in your pocket at the end of the day once broker and withdrawal fees are subtracted.  

Forex Blunder #5: Not Having a Trading Plan

What types of instruments will you trade? How much money will you risk? What type of evidence are you looking for before you enter a trade? At what point do you plan to exit trades? All of these questions and more are addressed in a trading plan. Without one, you’re essentially just making random moves and trading all over the place. Even if you make money with some of these random trades, your history will be so inconsistent that it will be impossible to pin down what is causing you to win or lose money. Meanwhile, trading with an organized plan helps you to know exactly what you’re looking for and you will be able to figure out what is and isn’t working much more easily. 

Forex Blunder #6: No Trading Journal

We mentioned that you might need to review your trading plan at some point in the event that you start losing money or whenever you’re looking to increase your profits. The best way to do this is by keeping a trading journal where you detail each trade you make, why you entered the trade when you did, how much money you made or lost, and etc. Whenever you need to go back and check on something, your journal will serve as a map that shows how well your plan is working, point out issues, and show you what you should keep doing the same. Unfortunately, many beginners never start a journal at all and feel lost when they start losing money because they can’t figure out the problem. Others might start a journal and abandon it after a few entries because they don’t realize how helpful it can be. 

Forex Blunder #7: Setting Unrealistic Goals

When you first opened your trading account, you probably had an idea of how much money you wanted to make. Traders that set realistic goals and accomplish them feel a huge sense of satisfaction, however, having the opposite experience only sets traders up for disappointment. When it comes to trading goals, this is why it is important to have a realistic outlook based on your experience and the amount of money you’ve invested. Rather than focusing on the exact amount of money you want to make in a period of time, you can set short-term and long-term goals that focus on improving your abilities as a trader. You’ll see an increase in profits in return, and you’ll also avoid beating yourself up because you couldn’t meet the unreachable expectations you placed on yourself.

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Beginners Forex Education Forex Basics

The Most Pervasive Problems in Forex (#2 Might Surprise You)

From the outside, trading and forex look like a pretty green field, full of people getting rich, and everything going really well. When we delve deeper into it though and actually start trading ourselves, we find that there are a number of different problems, problems that a lot of traders experience on a daily basis, problems that pretty much every trader goes through. These problems are easy to get into and easy to fall into their pitfalls, but there are ways to avoid them or to at least reduce the effects that they have on your trading and your accounts. Today we are going to be looking at some of the most common problems that many traders go through.

1) A Lack of Training

Anyone that trades without knowledge and experience can easily blow an account, or even multiple accounts if they do not learn from their experiences. Trading without the required knowledge and without any idea of what it is that you are doing is a recipe for disaster, yet it is something that a lot of people do and will continue to do so. When we trade without proper learning we are pretty much just guessing at what the markets may do. In fact, it could even be compared to simple gambling.

If you are planning on trading, then you need to put in the time and effort that it takes to learn the basics. Learn about different strategies, learn about risk management, and learn about how the markets move and are affected by things like the news. If you do these basic things, you will have a much better understanding of what it is that you are doing which will help you to develop a  better trading ability and also to keep your accounts and capital safe from silly mistakes of simply not knowing what you are doing.

2) Using Emotions

We all have emotions. They are powerful things, they can make us happy, sad, or even do stupid things, and when we trade without our motions we are often doing just that, stupid things. Two of the most powerful yet damaging emotions that we can have when trading are greed and overconfidence. They often come from different events, greed when we lose and overconfidence when we profit. They both, however, have the same effect on us, as they cause us to throw out our trading strategies and our risk management and then they cause us to place trades that we know we shouldn’t. Either too large for our account or without doing the proper analysis, this can lead to larger losses or even a completely blown account.

If we get to a point where we can feel our emotions coming up or even getting the better of us, it is important that we do something about it. It can be as simple as walking away, taking a step back from your trading terminal, and going out, having something to eat, just doing something that has nothing to do with trading at all. This is the best way to clear your mind. You could even try talking to someone about it, often we can get more rational by talking to someone else rather than just thinking about it ourselves. Once you have cleared your mind you will come back refreshed, with a clear view of what is going on, allowing you to better follow your plans and to place much better trades again.

3) News Events

News events happen. There are calendars out there that will tell you what news events are coming up as well as the potential impact that they could have on the markets and which currencies it may affect. What they do not tell you though, is about the sneaky news events that are not on there. They come out of the blue, maybe something has just been developed or announced or there is a natural disaster somewhere in the world. These sorts of events cannot be predicted, they cannot be on any calendar and when they do happen, they often cause the markets to jump about in very unpredictable ways. They can be a real pain, as you could have just done a lot of analysis, put on the perfect trade, and then BANG, an unknown news event comes out and the markets fly in the wrong direction. We have all experienced it and most traders will in the future too, there is nothing we can do about it but to manage the trades that are affected.

4) Unpredictable Results

We mentioned the news events just above, but there is another side to them, even the news events on the economic calendars can play with us. If there is a positive result then the expected movement in the markets would be up. However, there are times when the markets just do not see to follow what the results would expect. Even things like the Non-Farms Payroll news events, which is historically one of the ones that can influence the markets the most can go a bit funny. There have been times where it is very positive, yet the markets moved down. For those following the news, a buy would have been placed but then the markets went down which would cause a loss as well as a lot of confusion, so the markets simply cannot be predicted even when all the indicators are there.

5) Dodgy Brokers

Unfortunately, when it comes to money, any form of money, there will be people out there that will do what they can to get as much money out of you as they can. From the outside they look like any other broker, offering some great features and trading conditions, but once you have deposited your money, it is very unlikely that you will be able to take any of it out. They will take it and even try and convince you to put more in, either way, your money will be gone. You can try and avoid this happening to you by checking reviews, going for the bigger named brokers, or by using brokers that you know people who already use them and have successfully withdrawn money from them. Choosing the right broker is important, so make sure you take your time to choose the right one for you.

Those are just some of the issues that many traders experience. In fact, many of them every single trader will experience at one point or another in their trading career. We can do what we can to try and reduce the effects that they are going to have on us and our accounts, but for many of them they are out of cour control and we will experience them at one point or another. There are of course a lot of other problems out there, but with every single problem, there will be solutions, or at least a way of reducing the impact that they are having on our trades and accounts.

Categories
Forex Basics

Warning: These Mistakes Will Completely Destroy Your Forex Profits!

Let’s imagine that we have been trading for a while for a few months or a year, we are profitable, we are on a high and then all of a sudden, things go wrong, we lose some of if not all of our profits, but why? Why have we made these losses? There are a number of very common mistakes that people make which can lead to them losing their profits, or even their accounts. These mistakes can be easily avoidable, some through your own actions and others by changing something that you use. We are going to be looking at some of the mistakes that people make which can eat into their profits and also what you can do to try and avoid making those mistakes yourself.

Forex Broker Charges

From the very start of your trading career you will be using a forex broker, these brokers, unfortunately, have charges. Each broker will have completely different charges and they come in the form of three different things. There is the spread which is the gap between the buy and sell price, some brokers will artificially increase this gap as their way of taking payments for each trade, others trade straight up commissions. Every trade that you place will have a charge attached to it that you must pay. There are then swap charges, these are charges that you pay to your broker for holding trades overnight, they vary with the interest rates of the markets. All three of these charges have the opportunity to eat into your profits, when deciding which broker you wish to use you will need to take this into consideration, if you are using a scalping strategy then having a broker with high charges will basically use up all of your profits making it pointless. So ensure that you chose the right broker that won’t eat into your profits from the very start.

Swap Charges

We briefly mentioned swap charges above, but they can have a larger effect than you may think. We have seen trades being held over a period of a week or two which have had swaps so large that even though the trade was in the blue, it was in fact trading at a loss, and the longer it was held the larger that loss became. You need to keep track of your swap charges, especially if you have a lot of trades open at the same time, if you fail to do this, they can very quickly mount up and overwhelm your profits, even causing you to take a loss when the trade is in fact winning. Know your swaps and understand what swaps are going to be applied to your trade, it may be worth taking a small loss in order to protect yourself from larger swap charges.

Forgetting Stop Losses

One of the major parts of your risk management plans will be your stop losses, they are designed to protect your account and should be there with every single trade that you make. However, it can sometimes be easily missed, especially if you are very quickly trying to put on a trade at the current price due to volatility, some strategies will have you placing the trades and then coming back to them to combat the losses, but again, this can mean that it is easily forgotten. We need to ensure that we are placing the top losses with eerie trade and that we are putting them on as we open the trade. If you feel what you do not have time to put them on, then put them on as soon as it is open, if not then avoid trading in what manner completely, you need to take your time to ensure that they are on so that you do not take larger losses which could take away quite a lot of the profit that you have previously made.

Not Diversifying

Think about how many currency pairs or assets you currently trade? If it is just one or two then there may be an issue. It is true that when you start out that you should only concentrate on one pair until you understand it, but once you do it is important that you start to branch out. Having trades on more than one pair, more than two, or even more than three will help to protect your account, it ensures that you are not putting all of your money on a trading pair. This means that even if one goes negative, the others will be there to help maintain your current profit levels and to help protect your profits and account. It is important to branch out, but remember not to do it too quickly and overwhelm yourself.

Changing Your Strategy

If your strategy is bringing you profits, why would you change it? The thing is, that many people do for some reason. We cannot explain it, but if you are doing something and it is working, do not change it, the old saying, “If it ain’t broke, don’t fix it” is very relevant here. Yet we see people do it all the time, changing things because they think that it will make them that little bit extra. That extra would be nice, but why risk losing something that you already have in order to get it? Stick to the working strategy. It has brought you profits up to this point, so there is no reason why it will not bring you more afterward too.

Letting Emotions Take Over

Emotions are wonderful things, they make us feel and they allow us to do things that we otherwise would never dream of doing. Unfortunately, when it comes to forex, those emotions are not exactly the most helpful thing. Things like greed, overconfidence, doubt, and pretty much anything else can have negative effects on our trading. Things like greed and overconfidence can cause us to trade outside of our plan, to place additional trades, and to also place larger trades than we are used to which is dangerous and is a sure-fire way to make some losses. Things like doubt can make it so we simply do not want to place any trades, to avoid putting them on makes trading completely pointless. If we aren’t going to trade, why are we sitting here with our money in an account? It can be hard to control the emotions, but if you feel them taking over, take a break, take a step back and relax away from trading, this way you can come back with a clear mind and then continue to trade to the plan.

So those are some of the things that people do that ends up eating into their profits. There are of course a number of other things that people do, some are obvious, some are not so obvious, but what is certain for all is that we need to stick to our plans and not change things. Understand what and why we are trading and then simply let the profits grow without any added interference that could potentially cause us to lose some of those hard-earned bucks.

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Forex Basics

Avoid These 5 Trading Mistakes Like the Plague!

Mistakes are simply a part of life. Even so, there are times when mistakes can be completed avoided through information and education. Allow us to save you both time and money by pointing out five of the most problematic mistakes made by Forex traders.

Mistake #1: Trading Without an Education

Forex trading is great for the fact that anyone can decide to take it up, as long as said person is at least 18 years old with a few dollars or so to invest. On the downside, some traders rush into things too quickly out of eagerness to start making money as quickly as possible. Those that don’t know much about what they’re doing are bound to make mistakes and might not even realize how the mechanics of trading work, thus resulting in a loss of funds or of their entire deposit.

The good news is that many different educational resources are available online for free. One can simply search for terms like “forex trading for beginners” to get started. Once you think you’re ready, you can use more hands-on resources like quizzes that test your knowledge or try practicing on a demo account to get the best idea of where you stand.

Mistake #2: Risking too Much

Have you considered how much you want to risk on any single trade? The answer is different for everyone, but we should keep the same principals in mind. The more you risk, the more you could lose. Yes, risking more can lead to more profits, however, it’s better to trade with risk management in mind than it is to risk large amounts on a single trade. If you want to avoid this problem, it’s good to know that many experts recommend only risking 1% of your account balance on a single trade, or in some cases up to 5% at the maximum. This helps to ensure that you don’t lose too much if the market goes in an unfavorable direction. You can also accomplish risk management through other means, such as setting a stop order, trailing stop, take profit level, and so on. 

Mistake #3: Emotional Trading

This mistake has a lot to do with trading psychology and the ways that your emotions can affect your trades in a negative manner. Revenge trading, overtrading, or analysis paralysis are notable examples of this problem. While this category covers a lot of ground, the results of these various emotions usually lead one to lose significant amounts of money. For example, a trader that is overconfident is more likely to take larger risks and might not base their strategy off of solid facts because they feel as though they are on a lucky streak.

Controlling your emotions can be difficult, but the first step is simply identifying that a certain emotion is affecting your trades in a negative way. From this point, you can try to deal with that specific emotion and learn to control it. Some people like to use calming techniques or might need to be reminded that it’s okay to lose sometimes. If you’re ever feeling overwhelmed, it’s also okay to take a break from trading until you can gather your thoughts.

Mistake #4: Trading Without a Plan

Having a trading plan and strategy is crucial for success because it helps to determine the whys and how’s of your trading. With specific goals in mind, you can make more informed trading decisions that are based off solid evidence like technical or fundamental analysis, or both. If you trade without a plan, you’re likely to lose money. You also don’t want to rush in and try a new strategy with your real, hard-earned money. The best way to start is by testing a new strategy on a demo account before using it on your real account. Even if you’re a more experienced trader, you should still use demo accounts to your advantage for this purpose to avoid losing real money. 

Mistake #5: Not Staying Up to Date on the News

The price of currency pairs is closely related to certain economic factors and events. You need to know about news that can affect the economy in other countries as well as the one you live in so that you can be prepared for any news that might affect the markets. Often times, big news can cause market volatility. If you aren’t aware of what’s going on, then you might find yourself caught in an unfavorable market, which could result in some large losses. Since there are several countries that you need to know about, the best way to stay up to date is by using an economic calendar. Many economic calendars are even color coded so that you can see what is expected to have a high, medium, or low impact on the market. Or you can choose to avoid trading altogether if things look bleak.

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Forex Basics

What is “Recency Bias” and How Can You Avoid It?

Recency bias is a common trading mistake that many forex traders make without even realizing they’re doing so. Since this issue can cause losses and lead to other problems, it’s important to understand what recency bias is and how to overcome it. 

The term recency bias refers to the tendency of traders to take recent events into consideration without paying any attention to older pieces of information. The information that is ignored is often just as important as what the trader is looking at, or even more important in some cases. Without looking at the full picture, traders are put at a disadvantage because they don’t have all the facts needed to make proper judgment calls about what and when to trade. Here are a few examples:

  • Trader A only considers a new economic event without thinking about longer-term microeconomic factors that could also affect his trade.
  • Trader B primarily focuses on newly formed candles without tracking long-term trends.

Another way that recency bias can affect traders is when they are looking at their own success over a period of time. If you only think about things that have happened recently, you will have a skewed perception of the truth. For example:

Trader A has a record of 4 total wins and 6 total losses, with his last 3 trades being winners. Trader A has managed to increase his overall account balance by 1%. Trader B has a record of 8 total wins and 7 losses, yet he has just made 3 losing trades in a row. However, trader B has managed to increase his account balance by 5% overall.

In the moment, trader A is likely feeling successful because he has made 3 winning trades in a row, while trader B is beating himself up over his losing streak. These traders are only thinking of their most recent trades, however, and if they were to step back and look at the bigger picture, it would be clear that trader B has actually made more profits in the long-term. 

From here, recency bias can pose other psychological problems. Trader A may become overconfident and begin entering trades without enough supporting evidence, resulting in a quick end to his winning streak. Meanwhile, trader B might try to make up for his recent losses by placing larger trades without thinking of his risk management rules, or he could practice overtrading or revenge trading to make up for the lost money. 

If you’ve suddenly realized that you have also been prone to succumbing to recency bias, don’t panic – we’ve got you covered with helpful tips that can eliminate the problem altogether.

Track Everything in Your Trading Journal

If you’ve already been keeping a trading journal and logging every trade, then you’re on the right track. If you haven’t, this isn’t something you should put off any longer. To be clear, you need to log detailed information about every trade you make in your journal, including specific information like your profits and losses down to the pip, along with details about emotions you may have been feeling. Once you’ve been using your journal for a while, you’ll be able to see the bigger picture that you might have missed otherwise. Instead of only thinking about your most recent trades, you will be able to go back further and look at your results over a longer period of time. 

Stick to Your Trading Plan 

One of the best ways to stay disciplined is to write down a solid trading plan with strict rules and stick to them. This guide helps traders avoid emotional mistakes that can lead them down the wrong path, like overtrading, revenge trading, increased anxiety, and so on. Your plan tells you when and how you will trade and how much you’re willing to risk so that you can stay level-headed if the notion strikes you to risk more than is reasonable or to enter a trade when you shouldn’t. 

Review Your Winning and Losing Trades

The concept of deliberate practice refers to analyzing your winning and losing trades so that you’ll know what (if anything) you need to change. The best traders learn from their mistakes by figuring out what went wrong and where their trading plan failed, rather than sulking over their losses. Examining your winning trades is another part of deliberate practice that many traders may not regularly do, although this step can show you where your trading plan is the strongest. Engaging in deliberate practice is yet another way that you can get a bird’s eye view of your trading plan in the long-term.

Pay Attention to Your Emotions

We’ve mentioned emotion a few times throughout this article so far. To summarize, good and bad emotions can have a big negative impact on your trading results, as they lead us to make mistakes like overtrading, being overly hesitant to enter trades, revenge trading, overtrading, and so on. If your emotions start to get the best of you, take a step back, look at the bigger picture, and take a break if you need to. You might be feeling like you just aren’t cut out for trading because you’re on a losing streak, but you might only feel this way because you are suffering from recency bias. If you take a look at your overall results, you may find that you’re still profitable and that these losses aren’t a big deal. Just remember to give yourself time off if you’re still feeling irritable or try to do something to calm your nerves before you get back to trading, like listening to music, taking a nap, or anything that generally helps you relax. Afterward, you’ll be able to come back to trading more focused and less likely to make emotion-based mistakes.

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Forex Basics

Is Forex Taking Over Your Life? Here Are the Warning Signs…

We all have a different amount of time to dedicate to trading. Some of us might struggle to find the time because we’re juggling work, children, and other factors, and we might even feel guilty that we don’t spend more time online. Others might have the chance to trade full-time, which isn’t such a bad thing. If you eat, sleep, and breathe trading, you might find that some of these signs sound relatable. 

You Stop Missing Out on Good Opportunities

Sooner or later, we all make bad decisions when we’re trading, with one of the most common regrets being missed trade setups that could have made a lot of money. It’s difficult to watch a trade you hesitated on become profitable, some might even say it’s worse than actually losing because it’s easy to obsess over the money you could have made. Those that spend more time trading look at this issue with a different mindset, as they learn to leap on opportunities, rather than hesitating. Ask yourself if you’re commonly missing out on opportunities, or if you never fail to enter the market when you’re the timing seems right. 

You Look at Probabilities

Experienced traders know that it’s important to think in terms of probabilities when it comes to entering trades. Are you more likely to win or lose? Is the risk worth the reward? These traders also think ahead when planning out their next move and have a game-plan to follow, whether the trade behaves as they expected or vice versa. If the trade moves with you, you’ll know when to trail your stop, yet you’ll have stops in place to cut your losses in case the market moves against you. Being prepared by thinking of different outcomes and planning accordingly are signs that you’re a prepared trader. 

You Don’t Beat Yourself Up

Nobody wants to lose money, yet we all deal with it in different ways. Some traders just roll with the punches, while others obsess over the money they’ve lost. Taking losses too seriously is a sign that you haven’t been trading for that long or that you haven’t quite figured out how to manage the rollercoaster of emotions that trading presents. On the other hand, a trader that can keep it together without stressing when they lose has probably spent a great deal of time trading and simply understands that bad trading days aren’t out of the ordinary.

You’re Better at Spotting Behavior Patterns

Traders are always looking at trends and patterns, as checking the market’s previous patterns helps us make more accurate predictions. We look at the way that price behaved in past events and become better at spotting patterns that will help us make decisions about the future price. Yet you might not realize that this instinct of spotting behavior can carry into your everyday life. Have you noticed that you pay more attention to other people’s behavior patterns? For example, you might adjust a restaurant recommendation that you’d make to a friend because you noticed that they aren’t too fond of Italian food, even though you love it. Or maybe you tell a friend that a party starts at 7 when it really starts at 8 because you’ve learned to expect them to be late for everything. This is one way that forex trading can help make you more observant, both when it comes to looking at the market and everyday life. 

You Don’t Fight Your Instinct

You’ve probably had a gut feeling about something at several different points in your life. Maybe you’ve even heard the phrase “a woman’s intuition is always right”. The thing is, some of us trust that little voice in our head, while others ignore it. When you’re trading, you might get a gut feeling that tells you to enter a trade you’re unsure about. If you’ve been there, think about the outcome of your decision to either ignore or follow along with your instinct. In most cases, experienced traders will tell you that it’s better to trust these gut feelings than it is to fight them. If you’ve been around long enough to know that your trader’s instinct is usually right, you learn not to question that feeling whenever it strikes.

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Forex Basics

Trading Problems that Will Cut into Your Profits

As a forex trader, there’s a lot to know when it comes to making money… and avoiding the loss of money. Psychological problems, technical errors, and other issues have the potential to really affect how much cash actually winds up in your pocket at the end of the trading day. If you’re looking to maximize your profits, you should take a look at the 3 trading problems we’ve listed below to ensure that you are not making any of these mistakes. 

Problem #1: Using the Wrong Position Sizes

Using the correct position size is crucial for walking away with the best profit possible – if you use an improper position size, you could either lose out on a lot more or end up with a lot less than you could have. Finding the right size to use has to do with risk management. You need to understand how much you could lose, but your understanding should extend beyond your initial risk. You’ll need to be able to tell when you should make large trades and when it’s best to limit your exposure on each trade.

The best time to increase your risk is when the market is trading in your direction, you have a high probability to win, and there is a possibility for large rewards. You’ll want to use smaller position sizes when things are moving less in your favor so as to limit the loss you’ll take if you do lose.

Problem #2: Letting Fear Rule You 

It’s good to be careful when trading, but you can’t let the fear of losing money get the best of you. This causes some traders to pull out of trades too early when they could have stayed in the trade and made more money. Others have issues entering trades at all, even if the evidence supports their idea that entering the trade will be profitable. If you let yourself pull out of trades early or you find yourself avoiding good moves, your fear is going to eat into your profits a great deal. Fortunately, there are many tips online that can help you deal with this specific trading problem.

Problem #3: Not Adapting to the Market

In order to make the most profit possible, traders have to learn to be adaptable. This means that traders need to be able to adjust to changing market conditions, as the market is constantly changing. You’ll also need to adapt your expectations to fit those current conditions. For example, you can’t expect that you’ll catch a big swing move when volatility is low or when the market is trading in a tight range. Always ensure that your trades are planned with the current market conditions in mind.

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Beginners Forex Education Forex Basics

As a Forex Trader, Get Used To Being Wrong

Trading is a game of probabilities, ultimately you will either get something right or you will get something wrong, when we look for trading opportunities, we are actually looking for a number of different probabilities, each thing that affects a trade will add a probability towards the markets going up or down. We correlate these into a buy or sell, the one with the higher probability we go for. Sounds simple, and it is, the problem comes from the fact that the markets don’t always do what they are supposed to do and that you cannot take every single probability into account so you may miss one, but that one is a major one that would have gone against you.

So considering the fact that we look at so many different probabilities you would expect that we would get the majority of our trades right, but it is actually the complete opposite, you should actually be planning to get the majority of them wrong, especially when you are first starting out in your trading career. There is a reason why the majority of people fail and lose the money that they put in. However, one of the best defences to losses is to expect them in the first place, we are going to take a look at why it is so important to recognise that you will make losses, lots of them, and why you should be prepared for them.

The question of why we need to be able to prepare ourselves for losses is so simple to gain an understanding that you will have losses and a lot of them. People see the big numbers that others have gotten or have said that they have gotten (don’t believe everything you see on the internet) and so come into the trading game with the expectation that they will do the same with very little issue along the way. There needs to be an understanding that even the most consistent and most profitable traders will have losses, or multiple in a row, in fact, people can be profitable even with a very low win rate. So if even the best traders in the world are making losses, then you should certainly expect to make a few too.

Just because you have made some losses does not mean that you are doing anything wrong or that you are bad at trading, it does not mean that your analysis was bad or wrong, it simply means that the markets moved against all the positive probabilities that you had found, and this happens, a lot. Sometimes it can be something completely out of the blue, a natural disaster somewhere, or a certain president putting up a new twitter post. These things are out of your control, they are not available to be analysed and simply happen, throwing the markets out of synch and potentially causing your stop losses to be hit. You cannot really blame anything you have done for that.

You need to be in the state of mind where you are able to accept when you are wrong, you need to be able to see what you have done wrong or whether or not it was out of your control, as long as you are able to accept it, then you will be putting yourself in a good position for getting past it and for changing your own ideas to be slightly more successful. Your losing trades can give you an idea of certain assets or trades to avoid in the future, it can tell you if you are risking too much and they can ultimately help you to become a better trader.

So what we need to do next is to recognise that trading is not all about the ideas or the overall strategy that will make or break your account, it is your own personal skills as a trader. Of course, it will take those things mentioned above into account, but it will be looking at you as a whole and your overall understanding of what you are doing and trading. If you have confidence in what you are doing, confidence in the risk management that you have pt in place, you will be far more open to being wrong and to having losses, as you understand that those losses are a part of trading and that you are able to get through a number of losses without too much issue.

If you are still not used to the losses, then try keeping a trading journal (you should be doing this anyway) in order to document those trades that have lost, this will then give you a good insight into why it went wrong which can allow you to alter things in the future to help minimise your future losses.

There are a few things that you can think about to help reduce losses and to enable you to better accept those that you have. Consider how long you hold onto trades before they hit your targets, are you holding them too long or for not long enough? Consider what level of losses will be enough for you to consider altering your strategy or your own biases within the markets. Remember, that your job as a trader is not there to be right every single time, you are there to be profitable, while they do go hand in hand, you do not need to be right in order to be profitable We mentioned before, that many profitable traders have a very low win percentage, but because the rest of their strategy is on point, they can still come out with some money.

If you are not able to accept losses when they occur, it can lead to a number of different issues, it can put you into a slump or create emotions that could jeopardise your trading. If you feel that you have lost too much then it can make you want to get it back by increasing your risk, which is not a good thing at all. Make sure that you learn how to accept those losses so you do not fall into a slump which could potentially put your account in danger.

So those are our views on accepting losses, you will be experiencing a lot of them as you trade. It is paramount that you are able to accept those losses and that you are able to get through them. The earlier that you are able to do that, the earlier you can get through them, and the quicker you can become a profitable and successful trader.

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Forex Psychology

Is Forex Trading Addictive?

Trading addiction is a real problem, not unlike alcoholism or gambling addictions. Trading strongly stimulates the reward center in one’s brain and we become addicted to that rush. Trading can cause us to feel a rollercoaster of emotions, including euphoric highs when we win big. Those with a serious problem become addicted to the highs and lows and find themselves unable to stop. Unfortunately, trading addiction causes some of the same issues that drug addicts or alcoholics face because it can wreck relationships, cost one their job, and it usually leads to financial ruin. The good news is that there are ways to manage this so that trading can be practiced correctly and in a healthy manner.

Are you here because you think you might already be addicted to trading? One of the most common scenarios involves a beginner winning big because they get lucky, then they lose everything and try to win it back. The amateur trader then continues to lose more and more as they try to dig themselves out of the hole they have created, rather than knowing when to walk away. Someone that is addicted goes through financial resources that aren’t meant for trading. By that, we mean that anything you invest in trading should be disposable income. If you’re using grocery or bill money to trade with, it isn’t a good sign. 

Borrowing money from others, taking out loans, and selling personal items are other signs that one might be addicted to the rush of trading. People don’t always recognize trading addiction or realize how much it can affect them or their loved ones because it isn’t talked about as often as drug, alcohol, or gambling addictions. Once someone realizes that they have an addiction to trading, they might try to pull themselves out of it on their own. This can lead to disaster.

The best thing to do is to explain your problem to your friends and family so that they can understand how the addiction is affecting you. Those that don’t trade themselves might understand the way you’re feeling and why you’re spending all of your money once you explain this to them face to face. Seeking professional help is your best bet to solving the problem as a professional can help you recognize and overcome the problem.

Professional traders must have self-discipline and they need to be able to sit out when the market isn’t right for trading. Addicted traders need to feel the rush of trading and are more likely to make impulsive decisions, trade at bad times, and wipe out their trading accounts. Once a trader becomes addicted, they need to seek help to keep the problem from affecting their everyday life. This doesn’t mean that you have to give up trading for good, but a professional can help you manage your problem.

For example, you could set aside a certain amount of disposable income for trading from your weekly paycheck and never invest more than that at a time. Or you could mark out certain days of the week where you promise your significant other (or just yourself) that you won’t trade. If you run out of your weekly trading allowance or feel bored on a day where you aren’t supposed to trade, you could read articles and do research to improve your trading education. Or you could trade on a demo account to improve your skills. 

Finding healthy alternatives versus investing money and trading constantly will help you to be more in control of your actions. Taking all of these steps can certainly help one to overcome the problems that result from trading addiction.