3. NOT USING PROTECTIVE STOP LOSS ORDER
TRADING MISTAKES
This mistake fits right in with the lack of a trade plan and money management. It is the failure to use protective stop orders once you enter a trade – not mental stops, but real stops that cannot be removed. All too often, Forex traders use mental stops because they have been stopped out inthe past and subsequently watched as the market moved in their direction. This does not invalidate the use of pro-tective stops – it means that the stop was most likely in the wrong place, as it was likely not a good technical stop.When a protective stop that was determined before a tradewas entered is hit, it means the technical analysis was probably incorrect... your trade plan was wrong.
With a mental stop, as soon as the market has gone through the protective stop price, you no longer act like a rational human being. Now, you are likely to make decisions based on fear, greed and hope. How many times have you had a mental stop and tried to make a decision whether or not to take a loss? Typically, by the time the decision is made and acted upon, the market has run further against you. Invariably,you decide to hold onto the trade hoping that you can get out on a Fibonacci retracement to your previous stop
price. Unfortunately in many cases, it never touches that price again and you end up taking a large loss. Or, you make the mistake of holding the trade an extra day because you hope the market moves higher the next day. But thenext day, the market is lower yet and by then the loss is so large you cannot “afford” to get out of the position – and what should have been a small loss turns into a disastrous loss.
price. Unfortunately in many cases, it never touches that price again and you end up taking a large loss. Or, you make the mistake of holding the trade an extra day because you hope the market moves higher the next day. But thenext day, the market is lower yet and by then the loss is so large you cannot “afford” to get out of the position – and what should have been a small loss turns into a disastrous loss.
There is an old saying that ‘the first loss is the smallest.’ It is also the easiest to take, even though it may seem hard at the time. The only way to overcome this mistake is to have an unbreakable
rule with the discipline to follow it that a protective stop loss order or hedge must be placed on every trade.
I have found the easiest way to take a loss is to place the protective stop order or hedge limit order the moment or immediately after entering the trade.Do your homework when the markets are slow. Place your
orders while the market is still quiet. Another rule to follow – under no circumstances should an initial protective stop order be changed to increase the risk on a trade, but only to reduce it.
rule with the discipline to follow it that a protective stop loss order or hedge must be placed on every trade.
I have found the easiest way to take a loss is to place the protective stop order or hedge limit order the moment or immediately after entering the trade.Do your homework when the markets are slow. Place your
orders while the market is still quiet. Another rule to follow – under no circumstances should an initial protective stop order be changed to increase the risk on a trade, but only to reduce it.
TRADING MISTAKES
Huge amounts of money can be made trading Forex. While profits are definitely there for the taking, this is written to help you learn how NOT to make the common mistakes of a losing trader. Being aware of these mistakes, combined with a solid trading plan can lead you to success more quickly. We see traders make these mistakes time and again. If these losing traders would just take a step back and consider why they are making these mistakes, they could turn the corner and become profitable.
The following list contains the most common trading mistakes that we will cover in this article.
1. Not using a “trading plan”
2. Not having a money management game plan
3. Not using protective stop loss orders
4. Closing winning trades early and letting losing trades run
5. Overstaying your position
6. Averaging a losing trade
7. Increasing your risk with success
8. Overtrading your account
9. Failure to take profits from your account
10. Changing your trade plan in mid-trade
11. Not having patience
2. Not having a money management game plan
3. Not using protective stop loss orders
4. Closing winning trades early and letting losing trades run
5. Overstaying your position
6. Averaging a losing trade
7. Increasing your risk with success
8. Overtrading your account
9. Failure to take profits from your account
10. Changing your trade plan in mid-trade
11. Not having patience
12.Not discipline
I will be explaining in details each of the above common mistakes in trades.
WHAT DO DAY TRADERS LOOK LIKE
Day traders are defined as traders who place at least one or two trades on average daily.These trades are also to be closed before the end of the trading day to avoid attracting overnight charges like swap and rollover.Brokerage fee for day traders where they apply can be substantially lower than fees for other types of traders.While margins for most traders are usually around 1% of the value in traders account,day traders can face level as low as 0.25%.This means that a trader can trade say $10000 worth of currencies from an account of only $100 with a high leverage of 1:100,which is 1% margin.Also, given 1:400 leverage, the same $10000 can be controlled with a slow as $25 which is 0.25% margin.Sometimes,we even have $10 exposure particularly when trading the Yen on micro lot contract.
DEMYSTIFYING FOREX TRADING - 13 SECRETS FOR MAXIMUM PROFITS
The following guided secrets are the building block for a consistent profit making. Application of these secrets can never be over-emphasized and should not be taking with levity.
1. Do not over-expose your account maintain an account exposure of between 10% and 30%.
2. Always trust God to find and join the trend early. Also learn to test the strength of the tend using ADX (Average directional movement Index)
3. Understand your best entry and exit points using pivot points and/or Fibonacci Retracements
4. Understand the key Japanese candle stick reversal patterns.
5. Know when the market is flat or when the trend is weak and trade accordingly or stay away
6. Only use take profits according to predetermined market potential
7. Buy only in Oversold markets: An oversold market is one in which there no more securities to sell are or a great majority of the sellers (Bears) have left the market. Some technical indicators can help in determining this, e.g, Stochastic Oscillators, RSI etc
8. Sell only in Overbought markets: An overbought market is one in which there no more securities to buy are or a great majority of the buyers (Bulls) have left the market. The same technical indicators can help in determining this.
9. Never entertain fear even when the market moves against you, if you have a good trading system it will surely come back in your favor
10. Never be greedy show contentment in all your trades and this demon will be far from you
11. Do not over trade; learn to draw a line between overtrading and fear.
12. Always pray before making any trading decision: There is always a guiding light from God if only you trust in HIM
13. Rely on the Holy Spirit for guidance: He is very dependable and will never leave nor forsake you, if you surrender the battle to Him.
