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.