7 Pitfalls to Avoid in Forex Trading

ByJoseph CK Chua

Expert Author Joseph CK Chua

While success is a possibility and it's not necessarily meant for a few select individuals, there are several pitfalls that you must steer clear of if you are going to get your ticket to success. These pitfalls include:

1) Letting emotions take control: It is very easy for a forex trader to let his or her emotions take control when they are trading. You must develop an objective trading technique or else your decisions will be made emotionally instead of following an approved trading system. Emotions such as greed have caused people to stay in a position for too long until they exceed the strategic exit point and they end up losing any profits they could have made. On the other hand, fear will cause a person to leave a position much earlier than they really should have done thereby greatly reducing their profit margin unnecessarily.

2) Lack of discipline: There are many traders who develop perfect trading strategies but unfortunately they lack the discipline to follow them through. Many systems that are developed way before you begin trading may not necessarily anything at risk. Any good trader will plan to develop a strategic trading plan but must be careful not to let emotions take over. You need to have a strict sense of discipline in order to follow your plan through.

3) Lack of Capital: Making a loss is an integral though undesirable part of forex trade and as such any trader is going to expect loss. Your capital base needs to be such that you have a good allowance to take care of any losses that are bound to appear. There are many traders who end up using leverage heavily so as to grow their capital base and in the process they eat into their leverage so as to maintain their backup liquidity.

4) Unachievable goals and targets: While goal setting is an important part of trading, failure to set realistic goals is one other impediment. When you set unrealistic goals you may get tempted to take higher risks than you really should especially when doing individual trades.

5) High risk aversion: On the flip side of taking risks too much risk is the other side that is high risk aversion which will generally risk a trader's ability to take any risks that are required for any successful trading to take place. You need to be a brave person in order to make any move in forex trade.

6) Choosing an unreliable broker: You must make sure that the broker you choose to work with has the proper skills, techniques and knowledge to give you correct advice or else you will fail even before you start trading.

7) Ignorance: No one will succeed in any business without having proper knowledge of the business and everything that there is to know about it. You must burn the midnight oil in educating yourself on the principles and strategies of forex trading so as to excel in your effort to make money and enjoy your business as well.

Find out more about trading psychology and learn how forex trading success can be more about your mindset and less about the markets.