Spot the pitfalls when forex trading

If you can recognise them you will be
able to avoid if you follow a disciplined trading plan.

Overleveraging Your Forex
Account

Overleveraging your forex account is when you take out too large a
position in relation to your available margin. Even a small market
move will cause you position to be liquidated due to insufficient
margin.

Just because forex brokers offer generous leverage ratios or 100:1
or even 200:1 does not mean you should use it all at once. Don’t
base your trades on your potential margin leverage but on trade
specific factors based on your fundamental and technical analysis.

Failing To Adapt Your Forex
Trading

Failing to adapt your forex trading to changing market conditions
is another common forex trading mistake.

Market conditions are always changing and you therefore must be
flexible in your trading approach and understand how forex trades are
affected. Evaluate overall market conditions on an ongoing basis. A
range trading style won’t work if a trending move is under way and
vice-versa.

Use technical analysis to determine which trading conditions
prevail and be aware that you must adapt your technical indicators to
match the market conditions as well.

Being Unaware Of Current
Events

You must be aware of current events and how forex trading rates
are affected. You need to keep abreast of the fundamentals of current
events and when and if they are likely to influence the forex
markets.

Spotting a great likely trend in your technical analysis may be
undone by a major upcoming economic announcement in the country of
either currency in a pair.

It’s best to keep a calender of likely events and announcements
and review this on a daily and weekly basis. Keep a forward looking
mindset and plan for those events that you do know about as they will
be enough that will crop up that you don’t.

Defensively Trading
Forex

Defensively trading forex is another common trading mistake. All
traders experience losses and have losing streaks. After such a spell
it is perhaps natural to trade defensively, trying to avoid further
losses.

Take a step back and examine what went wrong with those trades and
the refocus on finding winning opportunities.

And be realistic! You are not going to retire on the proceeds of a
single forex trade. Be happy with a less than 100% trading plan and
lock in profits when you can.

Conclusion

Avoiding these common forex trading
pitfalls means being realistic and not over ambitious. Keep abreast
of current events and trade according to your forex trading plan.


I’m Dave
Johansen, co-owner of ForexForensic.com, a website dedicated
to forex trading. You’ll need a top forex broker to get started so be
sure to see our eToro Review, the best forex broker in the market.

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