9 . FAILURE TO TAKE PROFITS FROM YOUR ACCOUNT

WELCOME BACK

It is almost a natural law that over a given period of time,the Forex markets will allow you to make only so much money and then you are going to have to start giving some back. Yet, probably no more than 1% of all Forex traders I know have a rule to take profits out of their account.(However, they are quick to deposit money into their accounts when funds drop to untradable levels).

You cannot believe how often I see traders leaving profits in their accounts and then go for the “big trade” – the one that will give them a real “killing,” which usually kills their profits.This problem can be overcome by predetermining an equity level at which you will remove profits from your account.When you make profits in the Forex markets, take some money out and put it somewhere else. Your trading will move in cycles. You will make some, lose some, make some,and lose some. By taking money out of your account whenyou are profitable, you will not make the mistake of losing larger amounts of money when a down cycle occurs.

To your online trading success
D FXTYCOON

8 . OVERTRADING YOUR ACCOUNT

Assuming risk that is too large a percentage of your account balance on any single trade, either with too large a dollar
risk per contract or by trading too many contracts for any single trade or by trading too many currency pairs.This can also happen after a period of choppy market consolidation

when you “know” that the market is going to do something. You are so certain that this is going to be a big
move that you risk much more than the maximum 8% of your account balance. Already emotionally out of balance,
all it takes is a couple of limit moves against you and you
are bust.

To prevent this mistake from occurring, you must have a hard and fast rule that you can risk no more than a certain
percentage of your account balance on any trade regardless of how good the trade looks. My personal hard and fast
rule is to only have one position on at a time period. This does not count if I am hedged because with most brokers
hedging does not take up margin. This limits any possible overtrading. Overtrading is the quickest way to lose the
capital in your account.

OVERTRADING YOUR ACCOUNT

Assuming risk that is too large a percentage of your account balance on any single trade, either with too large a dollar
risk per contract or by trading too many contracts for any single trade or by trading too many currency pairs.This can also happen after a period of choppy market consolidation

when you “know” that the market is going to do something. You are so certain that this is going to be a big
move that you risk much more than the maximum 8% of your account balance. Already emotionally out of balance,
all it takes is a couple of limit moves against you and you
are bust.

To prevent this mistake from occurring, you must have a hard and fast rule that you can risk no more than a certain
percentage of your account balance on any trade regardless of how good the trade looks. My personal hard and fast
rule is to only have one position on at a time period. This does not count if I am hedged because with most brokers
hedging does not take up margin. This limits any possible overtrading. Overtrading is the quickest way to lose the
capital in your account.

7 . INCREASING YOUR RISK FOR SUCCESS

One of the most common mistakes I see Forex traders make is increasing risk exposure because of a perceived winning or losing streak. Just by being successful on a few trades,more dollars will be risked per trade because more money is in the trading account. Because you have more money (and confidence) when successful, you are also likely totake larger percentage risks. Not surprisingly, this ruins more Forex traders than a series of small losses.

Not allowing the risk percentage to unreasonably increase as profits are realized and discipline in maintaining protective stop losses can overcome this mistake. What I mean by ‘unreasonably increase’ is this – on a typical trade, your risk should be in the range of 3% to10% of your account size depending on trade confidence. As you see yourself on a winning streak, you are tempted to increase risk percentages.Never increase your risk percentage to more than
10% of your account balance on any single trade.

I have also seen traders risk more after a losing streak and risk less after a winning streak. Their thinking is that after a string of winners, a loser has to come at any moment so it is time to reduce risk. The other side of this is increasing the size of their risk after a string of losses thinking that a winning trade is imminent. Do not fall into this ‘thinking’trap! Those percentages of 3% to10% for me because of my high level of confidence in trading my proven system. If you are new to trading, your risk should be between 1% and 3% for a typical trade and 8%
maximum loss on any one trade.

AVERAGING A LOSS

This mistake is usually a holdover from trading equities or futures. In Forex trading, with 100 to 1 or greater margin,averaging a loss can be disastrous to say the least. A typical approach is that once you have entered a long position in the market and it drops lower, you might figure that since it was a good buy then, it is a better buy now. You may justify averaging down by figuring you will have a lower average entry price and require a smaller move to break even.

Unfortunately, you will lose twice as much if the market continues against you, as it almost always does. There are approaches that allow you to buy a market at one price level, add to the position at a lower level and add on again at even a lower level, as long as this was your predetermined game plan before you entered the trade initially.

Personally, I never trade this way but it is some manager’s strategy. You must also have an unmovable protective stop loss order that takes you out of the entire position.This mistake is easily overcome by having a strict rule to never average a loss unless your predetermined plan calls for averaging the trade in the case the market moves against you. This can be done with a pending unmovable protective stop loss order to exit the entire position if it is hit.

5..OVERSTAYING YOUR POSITION

One of the most common mistakes of trading currencies is overstaying a position, or simply failing to take profits at a predetermined level. There seems to be a natural law that the market is only going to allow one individual so much money before it starts to take it back. Yet, it is when you have these profits, especially real profits in your account that you often try to get the last nickel out of a trade. If the market meets your profit objective and you are in the trade without an exit order, then you are overstaying your position... period!

All too often the market breaks sharply through your “mental stop” and you watch as your profits disappear before your eyes. Then, you decide to hold the trade hoping for a small rally and the market never rallies enough. The trade profits fall back to break-even, and now you really begin to hope. Next thing you know, you are sitting on a loss. Be aware that a large profit can turn into an even larger loss.

The only exception to this would be if price action were moving strongly in your direction. In this case, you can move your protective stop to your profit target or use a
trailing stop.