The most common mistakes made in Currency Trading can be directly linked to a few basic misunderstandings of the market.
We’re flooded with information and opinions, and unfortunately for you and me, there are no magic wands to reveal who is genuinely looking out for our best interests. Everyone is out to make a buck, and sometimes the little guy can get swallowed in the waves created by the giants.
It’s human nature to let your emotions influence your decisions. Fear of losing money, greed and the “what if’s” all can shift your viewpoint, and the correct decision can be lost along the way. We’ve all lost money in the forex right? It’s the promise of getting out of the drudgery of 9-5, of a secure and comfortable way of life, managed from your laptop, which draws us all like moths to a bright light. What you need is a plan, a step by step formula to wade your way through the inconsistencies, the half-truths, and just the plain out incorrect.
Step 1 – Foundation
Trading is a business, whether you plan on entering full time or just starting a part time venture. All the rules of successful businesses apply – you need to make a plan and follow through.
Ask yourself important questions – How much time can I wait for profit? Can I wait 6 months and follow the trend, or do I need to be out every day? How much time can I invest daily? Can I afford to sit in front of the computer screen for 6 hours, waiting for the perfect volatile moment? Can I automate, and trust someone else’s opinion to make my decisions for me? Do I want to spend the time to have mastery over currency trading, or would I prefer to use the expertise of someone who’s been there?
We’ve all heard stories of traders who just want to get out there, let experience teach them – and we all know the endings to such stories (unpleasant to say the least). It is VITAL for the success of your trading that you have a solid foundation and plan, and that you stick to it under all conditions. It’s very easy to go out of your business model “just this once”, and have it end in spectacular failure. Develop an execution plan. Buy or sell under those conditions, no exceptions.
Step 2 – Trading Plan
Write everything down. You can’t control the markets, you can’t control the price action – you can only control your participation. You need to set a regular time to sit down and review your positions and systems, and write that down. Find what it is that you need to become a disciplined proactive trader in the forex currency exchange market. You need to write your plan down, and write your results down, so you can learn what your winning behavior is and what your losing behavior is.
Maybe you’re going to paper trade for 30 days, maybe join a trading group by November this year, maybe read two books by the end of the month, it doesn’t matter. Without records to review, you cannot know what is working for you.
It is easier to write successful rules, if you have documentation showing what is working for you and what is not. Make note of your time invested in the behavior, the number of winners/losers, amount won/lost. You can use this to plan your successful trading, which works right for you, the individual.
Step 3 – Paper Trading
Paper trading is generally the first port of call for those trying to learn currency trading. However it can be dangerous, as it can give a false sense of security. Your psychological viewpoint will not be the same if you’re not risking anything, therefore your decision making will be different than if it was in real time.
You’re not exposed to the real emotions of trading, because there is no risk. Paper trading can help you get familiar with your platform; make sure that your mistakes are not going to be common errors from software. In order to really learn, however, you need to be doing it out in the real world, where your fears can influence your choices.
Step 4 – Real Time – Get in!
Your ultimate goal is to have a bank account that’s growing, right? In order to do that, you need to start trading. We know that you can’t pretend to trade. It’s important for you to get some real, emotional, and psychological experience of trading under your belt, so you can make educated decisions. You will have losses. Nobody has 100% winning trades, and there is no system or set of rules that will give you a guarantee.
Your goal with trading is to get in touch with what you personally need to learn to be successful. What is it that let you down with that trade? Write it down, document it, and work out a plan to get past it. You will only learn your strengths and weaknesses after you have some real time forex experience. Every successful trader has had to face whatever it is that holds them back.
Step 5 – Get Help
Find a community of traders or like minded individuals who will empower you to make the right decisions. It will help you stay focused and disciplined on what really matters. Learn from their mistakes by observing how others trade and the problems that they have faced. You will avoid costly errors this way. Share your experience with others, on a web forum, seminar, or trading group, and you will reap the reward of their shared information and education. Build on their success, and remember – all successful people in any profession share their knowledge.
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