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We can be sure that most experienced Forex traders remember their very first attempts at trying to beat the game when they crashed their accounts in demo mode while learning all they can about the FX Market. The truth is that when the majority of us trade the market with real money early on we are overcome by our own greed, and the urge to make money fast causes us to forget what we fundamentally learned about. It is true that only about 5% of traders actually manage to control their emotions and make money in the business. The remaining 95% of us tend to make one or more of these seven common mistakes:

There are seven mistakes most Forex traders make when trying to court the currency market.

Not getting a proper education is a major mistake

There is no way that you are going to make money consistently trading Forex without some kind of trading education on how these markets work, and how trades are executed in a way which maximizes your probability of a successful outcome. Your Forex trading education can come from attending classes and workshops, from reading books, or from viewing videos that explain to you the various strategies and techniques used for locking in profits when the market moves in your favor, and mitigating losses when the market moves against you.

Poor capital management

It is important to adhere to the two main rules of trading the FX Market: The Two Percent Rule and the Six Percent Rule. The 2% rule states that we shall never risk more than 2% to our total account equity on any single trade.The 6% rule states that we shall risk no more than a 6% of our position's margin deposit loss on any one trade,and that maximum potential loss needs to be enforced by the use of stop-loss orders.

Not having a trading plan

Every trade that you enter into must be planned out ahead of time, and not just made because you think that particular currency pair is "cheap" right now and needs to be bought. Your trading plan should include your entry target price, your exit target price, your maximum allowable loss (stop loss), and what indicators (moving averages, etc.) that you expect to use to guide you in connection with timing your entry and exits from the market. When you finally enter a trade, that trade needs to be managed according to changes in market conditions and other factors such as market volatility.

"Doubling Down"

This is a very common mistake made by a lot of market "greenhorns" who get a little impatient when they have more than a few losses in a row. They get antsy when they get stopped out with small losses only to see the market move in their original direction quite a bit. The trading mistake comes about when they double up or increase the size of their speculative position in order to quickly get back what they earlier lost. This inevitably leads to more losses.

Getting into a trade after it has already moved up or down

This is a very common mistake, and an easy one for Forex traders to make as it seems on the face of it the right thing to do. The whole idea of trading is to get into the market at a point where you now believe the prevailing trend has changed and is about to reverse. In other words, get into the market before it begins to make a big move. Instead of doing this the undisciplined trader watches the market move up or down a lot, then decides (usually much too late) to jump on board the trend and try to ride it further. Very commonly, they get into the trade just as it starts to run out of gas. The idea behind a trading education is to get you to understand that importance of trying to anticipate big moves in the market rather than react to them after they happen. After all, anybody can do that.

Trading against the trend

One of the worst mistakes that you can make in any market is to trade against the prevailing trend. This is very much like trying to swim against a rip tide. You can't win the game for very long. In order to be a profitable forex trader, you need to be able to understand that there are different trends taking place within different time frames within a market, and you need to be able to identify all these trends so that you end up trading with the trends rather than against them.

Buying a market as it approaches resistance, and selling a market as it approaches support

Support and resistance tells a trader a lot about the constraints and limits of market price moves. It tells him where the likely tops and bottoms are, and where trends are likely to begin to slow down and perhaps reverse. Not being aware of the support and resistance levels can be harmful to your trading career. At times you can end up buying into the market after it has already gone up and nearing a point where prices encounter a lot of selling pressure due to the fact that this is where this has happened in the past. If many people bought at a certain price level, and the market quickly backed off from there, then it is reasonable to assume that a lot of these people will have the urge to get their money back when they see these prices again, and reflexively sell all at once. This is how resistance levels come about. Not having enough knowledge of where these levels are can have you buying the market just at a time when other people are selling into it, and that is a major mistake.

Jeff Webb
forex conqueror

By Jeff Webb
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