HOW NOT TO LOSE A DEPOSIT ON FOREX?
97% of traders are losing their deposits! Sooner or later, but it happens. Part or all, but the money disappears from the trader’s account. This fact is not news or sensation and according to the logic of things should scare off newcomers and those who have already managed to merge a couple of deposits. But everyone thinks they are OTHERS! That they are the smartest, and all the other amateurs. That they will now come and put the market on their knees! This is a typical trader error number 1.
In total, you can identify 10 mistakes of the trader, which lead to partial or complete loss of money.
In this article, we’ll look at all the typical misses of sellers on the exchange, both beginners and experienced, we’ll figure out how to avoid them and not drain the deposit … quickly:)
TYPICALLY TRADING ERRORS
MISTAKE #1. I’M SPECIAL!
As already noted at the beginning of the article, self-confidence does not lead to good. Yes, you are special … for your mom, but on Forex, more than 80 million people are like you and everyone is trying to survive. Having read clever books, you will say to me: “Andrew, but if you do not believe in yourself, it will not work!”. I agree that you need to believe in yourself, but not blindly + you need to plow like a damn to actually earn in the long run. Instead of considering yourself as Special, it is better to tune in to hard and long work, only in this case you have a chance to become a successful trader.
MISTAKE #2. BOOSTING OF THE DEPOSIT
Many times I met people who want to disperse their unfortunate 100 bucks to 10 thousand, and even to a million! It may seem ridiculous to you, but more than 50% want or tried to disperse the deposit. Of course, some of them at first turned out, but a total of 99% one is a complete deposit sink. And all because of the desire for quick profit. Remember, on Forex you will never earn quickly and easily! This is a myth that is skillfully used by forex brokers, especially “kitchens”, in order to lure as many new customers and earn their deposits!
MISTAKE # 3. EXCESSIVE RISKS!
I do not know of any trader who has been enriched by overestimated risks. Most often the result is one – loss of money. The reason for this error is similar to error # 2 – the desire for rapid enrichment and gaining complete freedom. Remember, Forex is a very complex business. Like any other business, it can not be built in a short period of time. Be patient and learn, only when you feel confident, you can slightly increase the risks.
MISTAKE # 4. TRADING ON THE NEWS OR ABSENCE OF A NORMAL TRADING STRATEGY.
Of course, trading on the news is a very lucrative strategy, but it is too risky. Yes, in able hands and with the observance of risk management success is possible. The problem is different: most often, news is used by those who do not have a worked-out and rolled-out strategy. It looks like this: put two pending orders in different directions at the same distance with the same stops. The idea is that wherever the price goes, it will hit the pending order and earn a good profit to the trader.
In reality, it often happens that during the news release the price throws the “hairpin” in one direction and sharply goes to the other. There are cases when after this the price does not go further, but again changes its direction of movement.
As a result, at the best the trader will receive the lock, at worst – he will grab 2 stops. Given that the amount of such players are decent, then a couple of such “super” trades, and money on the account remains only for beer)
The conclusion: do not be lazy and spend more time studying the market, do not chase the easy money that “promises” trading on the news.
MISTAKE # 5. USING FOREX TRADING SIGNALS AND BROKER ADVICES.
Remember, no normal broker with a solid license will not help you and give you some trading advice. This is prohibited by law and a forex broker may incur severe penalties for such activities. But this does not apply to offshore forex brokers. They are always ready to help you with good advice or a trade signal.
At first glance it seems great. But the reality is harsh! Since you are trading in an offshore broker, which is 99% of the kitchen, you should understand that the company lives with the sink of customers. Think, if she is interested in taking away your deposit, then what advice will she give?
Everything is obvious! There is only one way out: trade yourself, learn, try, and you will succeed.
The first 5 errors are more common for beginners. Next, we will look at the typical mistakes experienced by traders.
MISTAKE # 6. CHOOSING A FOREX BROKER
Unfortunately, even experienced traders often do not know how to choose the best forex broker and open accounts in companies that have seen or heard advertisements. In 99% of this is the kitchen, most of which are off-shore. Of course, not all of them are so lousy, but I know many cases where even experienced traders undressed. So do not create additional risks for yourself, trade with real STP / ECN brokers with solid licenses. For more details on how to choose a reliable broker, you can read here.
MISTAKE # 7. NON-COMPLIANCE WITH RISK MANAGEMENT
I knowingly for the third time I focus on risk management. 70% of the success in the Forex market depends on how you handle your money. It is the right distribution of risks that will help you survive in difficult trading periods, when profitable trades are much smaller than usual.
MISTAKE # 8. NEGATIVE RISK/PROFIT RATIO
Mathematical expectation is one of the most important conditions for survival in the market and one of the criteria for choosing a good PAMM-manager. If your average stop is larger than the average profit, profitable trades should be more than 50%, or even 60-70%. Constantly trading with such a% of profitable trades is very difficult, in addition, often there are periods when your strategy starts to work worse. It can be summer, when the market has little liquidity, or just an unfortunate period – there are many options. In such situations, a positive mathematical expectation is saved.
My advice to you, try to make deals where the potential profit is more than a stop 2 times, or even better in 3. With the ratio of stop / profit 1 to 3, even in the worst periods of trade you will not just afloat, but also earn, Because you will be enough to make 30% of profitable trades to be in the black!
MISTAKE # 9. PROBLEM WITH PSYCHOLOGY
One of the most important roles in the success of a trader is psychology. If you want to become a professional and live only with trade, forget about fear, greed, passion, empty hope.
Do not be afraid to enter into a deal if there is a signal. Do not be afraid to lose money by getting a stop loss – a good stop is sometimes better than a profit.
Do not be greedy: you see that something strange is beginning to happen in the market – close the position. Perhaps the price will go further, but over a long distance it is the ability to close the position in time will help you become successful. Again, do not overstate the risks in the hope of snatching a bigger piece. Better is a small profit than a big stop.
Do not be a bully. In the market of chaos, you do not see the normal inputs, your trading system is silent? So go take a walk. Do not trade when the situation on the market is not clear to you. You will save both money and nerves.
Leave empty hopes for someone else! In the market, you must be cool, balanced. Do not expect that now the market will reverse and fall to your side or that this transaction you will 100% close in plus. Stop, so stop, profit, so profit! You must be like a stone!
MISTAKE # 10. LACK OF A TRADING DISCIPLINE
The most insidious mistake. You created your trading system, tested it, found a suitable variant of risk management for yourself, tuned in for hard work, but … when you are in the market and something goes not according to your scenario, then start to panic and do stupid things. This is the essence of the problem with discipline. You must, no matter what, strictly adhere to your trading system! Anytime and anywhere! Only then can you understand whether it works or not. This is the only way to perfection and success.
Yes, it’s hard, but as for trading, J. Soros said: “This is the easiest money that is hardest to earn”.
1. TRADING AGAINST THE TREND
Most often this is expressed in an attempt to catch a reversal. It ends with either a stop loss (at best), or a severe drawdown in the hope that the price will roll back. This greatly affects the psychological state, so strongly do not advise you to trade against the trend!
2. IGNORE STOP LOSSES
Stop is just a must! Always! This is your most reliable friend in trading! In addition, no normal investor will give money to the management of a trader who does not put a stop! Do your own conclusions.
Traders often ask me to help them out with the lock. But when I look at the chart and see that the price has already gone 200 points from the place of the castle, I understand that this is a real problem. The only way out is to close the lock, fix the loss and never use it again. The lock is an illusion that you will protect yourself against losses, but in fact you are creating yourself unnecessary troubles. Of course, there are traders who know how to deftly out of them, but if you want to become a professional, forget about the locks.
4. AVERAGING (NEGATIVE SCALE IN)
Opposite to the lock, when the trader averages, he opens positions in the same direction as before, with the hope that the market will unfold and he will be able to earn more. Very often it ends with a full deposit sink. Most recently, I saw a situation where one grief-manager constantly averaging and trading without stops, merged 15 thousand dollars. Do not average! The only case is when you see that a good entry is emerging, for example, from a volume level, then you can add a position, but this should only be done with enough experience and always put a stop!
5. USAGE OF BROKERS ANALYTICS
Analytics, which can read every person or that provides you with a broker, is bullshit. You can wipe it off. Trade yourself, do the analysis yourself, otherwise you will never learn to trade!
In the forex market, as in any other financial market, there are many nuances and pitfalls. This is a very difficult profession, but if you are willing to learn a lot, spend more than one month to practice, if you are purposeful and persevering, then you have a chance to become a professional trader.
Think with your head – and you will succeed!
In the next article, I’ll write a step-by-step instruction on how to succeed on Forex and make trading your profession.
In the comments, write the most common mistakes that you made or experienced with your familiar traders.
If you feel that you can not do it yourself, add to Skype – vovkfx, I’ll be happy to help you.
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Profits to everyone!