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.
Thank you for such wonderful and interesting article about Forex Strategies Resources.
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