Forex Trading Mistakes

Forex trading can either be frustrating or exciting. Depending on the kind of forex trader you are, you are bound to face a lot of opportunities to fail trading forex. Yes , I said opportunities to fail not succeed trading forex. Making forex mistakes is a normal thing that even professional traders go through. Even chess players make mistakes once anda while so it is not the end of the world for the forex trader.

However, there are a number of mistakes that all forex traders seem to repeat .Cutting down on these, would greatly increase the success probabilities for the forex trader.

1. Choosing Your Forex Broker.

Some 5 years ago, I could count the number of retail online forex brokers in  my hands. Now we have over 200 forex brokers and they are still increasing in number . So why do new forex brokers still flock to brokers who are undercapitalized and who’s cost of doing business is too expensive for them.

Cost of doing business for the forex trader includes the pip spread. If you choose a broker who’s pips are 2 or more pips than my own broker, I am making at least 2 pips profit over you each and every time we put the same trade . This adds up .For example if you lose 2 pips each trade at $10 per pip at the end of 1000 trades, I will be $10,000 in profit though we are trading the same system.

2.  Lack of Forex Business Plan

I know forex brokers like making forex trading seem like the best get rich quick scheme ever created but the truth of the matter is that forex trading is just like any other business you will ever start.

The best way to fail in any business is to not have a business plan.The forex trader must be savvy in identifying his source of trading capital, costs of doing his business especially opportunity costs etc.

I have seen very few forex traders with a business plan and this may be one of the main reason for forex traders turnover.

3. Lack of a Forex Trading  Plan

This might seem to be the same as a forex business plan but they are not. A forex trader without a forex trading plan is like a fisherman without a hook. You will never catch any fish without a forex trading plan.

A forex trading plan should be very specific. If a 10 year old child read the trading plan, they should be able to execute it. The basic items to be listed in a forex trading plan include

1. Entry strategy
2. Exit strategy
3. Trade Continuation Strategy
4. Money Management Strategy

There should be no questions asked about a trading plan and it should be written down. Again ,very few forex traders even bother with this.

4.  Think Long Term in Forex

It is true that some people make a killing in a very short time in the forex market. However, it is more likely that you will lose your forex trading capital in an even faster time. The best forex trader is probably George Soros, but he is still trading forex because he thinks long term, not because he made a quick buck.

Any forex trader who thinks of trading in terms of a get rich quick scheme might as well go over to Las Vegas and gamble. He might have better odds of beating the forex market.

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