Thursday, 15 July 2010

An Advice to forex traders, When should act and when react.

Let us discuss about two major mistakes 90% of new forex traders are committing and losing their money.

1.    Overtrading

2.    Trading with big leverages

Some traders think that they should be in the market for all the time. Yes you cannot make money when you are not in the market, but at the same time you are not losing money also when you are not in the market.

Why this overtrading happens?

It is usually triggered by one of two scenarios:

When you are on winning trend you may feel that some thing good is happening to you and you may trade quickly without checking the market trend and also without sensible trading method.

When you are on a losing trend you may feel that you should change it soon.

Both the above cases you are controlled by emotions not the reality and you could not determine the correct market condition.

For a long time success in forex trading you should have the ability to understand the market trends easily and speedy and should act according to your experience. Try only high profitability trades. Then you can turn your future to a profitable one, even if there are some losses in between. Ultimately you will win with profit.

You can apply probability theory for trading well. When the market shows a losing trend you may take decision to stop trading. But doing risky trade because of your adventurous nature is not good for your trading career.

In the cases of over leverage you may get in to a trap that getting more and more as soon as possible. But if you are a beginner you must not go for trade when it is a high leverage. Only an experienced trader can harvest profit form high leverage. You may loose all your money in high leveraged market. For beginners low leverage is better to make profit. Make small profits slowly and learn the trade and the market well.

But please be aware that an experienced trader also hesitated to trade when it is high leverage. Because in high leverage tendency the market may soon twisted back an may fall with a loss.

In low leverage you have to do a number of trades to get a good profit. For a successful trade first you think of risk and thinking of profit should be a second priority. Avoid loss is the better way to profit. Reduce risk to gaining profit.

For forex beginners make your skill when the market is on low leverage and never for trading when the leverage is higher than 10:1. When there is an opportunity, go ahead and if there is no opportunity sit aside and just watch the market. Know that when there is a low leverage, your money is safe and trade safe without bearing high risk.

May advice is that Learn with a free demo account which provides all real conditions and after getting enough experience go for a real account with your own money.

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