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Thread: Ten New Trader Pitfalls

  1. #1
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    Default Ten New Trader Pitfalls

    #1 Avoid Errors in Order Entry!
    The quickest way to lose money in the markets is to make mistakes when you place your orders. Fortunately, this is something very easy to fix. PAY ATTENTION! It's as simple as that. Every trade entry system you could use has some kind of order confirmation mechanism. Take the extra two seconds and check to make sure everything is correct. I can assure you this will save you money, not to mention a little stress and high blood pressure.

    #2 Use Only Risk Capital!
    ew traders often get so caught up in the excitement and anticipation of trading that they let common sense go on holiday and trade with money they have no business putting at risk. Any money you put in to the markets must be risk capital, money you can afford to lose and not impact your basic financial situation. It's hard enough to be successful as a fledgling trader. You do not want the added pressure of having to make money and/or not being able to afford losing it.

    #3 Start With Enough Capital!
    It takes money to make money. You've heard that often enough. Accounts that are too small can be a major hindrance to trading success. They suffer from transactions costs that are proportionally higher than is the case for larger accounts, which hinders returns. They also restrict the number of positions you can have at one time, which means you cannot always take good trades that come along and you may not be able to diversify as you should.

    #4 Trade Small!
    When in doubt, put less money at risk. There is no more swift way to lose huge chunks of money than to trade too big. Your trading size should be determined by your account size based on the risk being taken. If you are risking an amount of your account that potentially puts your long-term ability to keep trading in question, your position is too big. If this means you cannot trade certain instruments, find something else.

    #5 Avoid Trading Too Often!
    Trading can be fun, exciting, and profitable. It is also an intermittent reward system, like gambling. That means it's easy to get hooked and in a dangerous cycle. The feeling you have after a winning trade will make you want to do it again. This can lead to sloppy trading. I personally try not not to make any additional trades the same day as I close out a position when trading short-term. That helps me get some time and space to ensure I am making good decisions based on my system, not my emotions. Do whatever you must to ensure you always trade in control.

    #6 Have a System!
    You will not be a successful trader if you do not have a system. They come in all different shapes and styles, but there are a couple of common elements. A system has both entry and exit determinants. A system can also be described. If you cannot verbalize your system, it's not a system. If you don't have rules for both entry and exit, it is not a system.

    #7 Take the Time to Learn!
    Many, many dollars can be saved by new traders if they take the time to learn and practice. There are so many resources so readily available today that there is no excuse for not entering the markets prepared to do battle. Demo accounts can be found for all major markets. That means you can practice your order execution, and you can paper/demo trade your system to confirm its viability before putting a single dollar at risk. To do otherwise is foolish.

    #8 Trade in the Right Time Frame!
    You have a life beyond trading. May be you have a job or go to school. You have family and social commitments. All of these things combine to determine the timeframe you can use. It does not make sense, for example, to try day trading when you cannot not monitor the markets almost continuously. In my own trading, there are times when I can day trade or swing trade (1-3 day position durations), but there are others when I know I won't be able to dedicate as much time to the markets and therefore have to take longer-term positions. You must find a trading time frame that fits your lifestyle.

    #9 Trade the Right Market(s)!
    What often happens with new traders is that they get in to trading because of some experience they had which introduced them to the thrill of the game. That experience probably also got them in to a certain specific market, like stocks or foreign exchange. An emotional attachment is established. Needless to say, this isn't the best way to pick the market you should be trading. The various markets have different trading profiles. Some are more volatile than others. Some are good for trading intraday, while others are better for longer-term action. The process of deciding to begin trading should include a hard look at what market(s) you should trade based on your account size, trading time frame, personal knowledge and interests, and risk tolerance.

    #10 Understand the Risks!
    Every market has different risk factors. In fact, each trade has its own distinct risk profile. You need to be aware of what they are. You may have a general awareness that the market may not go the way you thought. That is certainly true, and that is why stop loss orders are advocated. It is how the market can go against you, though, that is important. In the major markets, things like economic releases, earnings reports, and statements by government officials can influence prices. Some cannot be avoided, like a natural disaster, but others can be by simply being aware of the calendar and taking measures to guard against an adverse data release or speech by someone like the Fed Chairman.

  2. #2
    In Profit acidguy's Avatar
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    Default

    thx for this great post. here i am putting some personal views and opinion of what i have read.

    #1 Avoid Errors in Order Entry!

    thats why i am here trying to get my $25 bonus, some other sites gives too but i prefer winning them here since i can make the perfect entry with fxegypt metatrader.

    #2 Use Only Risk Capital!

    this affected me the last week, i felt really sad losing my microtrading account money for following some "gurus" advisor about the usa payroll number predicted about 127k then came 92K so i will have to risk money. that dollar lost hurts me.

    can i open another microaccount, or get reseted current mine?. thx

    #4 Trade Small!

    big, big mistake i was commiting, many times i have been kicked out of the market for not enough margin when. then some minutes, hours later the market comes to my favor as i was expecting but i am out of game.

    #5 Avoid Trading Too Often!

    sure i have to fix this but as you probably know, an addiction is not hard to beat.

    #8 Trade in the Right Time Frame!

    i am taking this into account too. i have been noticing i am having great success trading at night and not in the day. so i will find out why.

    #9 Trade the Right Market(s)!

    agree, after probably 1 month i am starting to see patterns in some pairs. some reactions to some news and events. my favorite pairs are EUR/USD/ USD/CHF, USD/JPY.

    #10 Understand the Risks!

    i am blinded for now by the excitement forex bring me so i think i am not see clearly this in some time XD.

  3. #3
    Piplet
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    Thanks for the post!

    I am reading the tips with consideration to myself and i take time to realize where i really have a big issue..

    Well, it seems it's the #10..

    Like acidguy, i got blinded with all the excitement and the thrill of trading so i use to forgot the important things to remember..

    Anyway, i am trying to learn from my mistakes and hopefully i will get from there..
    Last edited by bhefx; 02-27-2008 at 03:42 AM.

  4. #4
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    Quote Originally Posted by acidguy View Post
    thx for this great post. here i am putting some personal views and opinion of what i have read.

    #1 Avoid Errors in Order Entry!

    thats why i am here trying to get my $25 bonus, some other sites gives too but i prefer winning them here since i can make the perfect entry with fxegypt metatrader.

    #2 Use Only Risk Capital!

    this affected me the last week, i felt really sad losing my microtrading account money for following some "gurus" advisor about the usa payroll number predicted about 127k then came 92K so i will have to risk money. that dollar lost hurts me.

    can i open another microaccount, or get reseted current mine?. thx

    #4 Trade Small!

    big, big mistake i was commiting, many times i have been kicked out of the market for not enough margin when. then some minutes, hours later the market comes to my favor as i was expecting but i am out of game.

    #5 Avoid Trading Too Often!

    sure i have to fix this but as you probably know, an addiction is not hard to beat.

    #8 Trade in the Right Time Frame!

    i am taking this into account too. i have been noticing i am having great success trading at night and not in the day. so i will find out why.

    #9 Trade the Right Market(s)!

    agree, after probably 1 month i am starting to see patterns in some pairs. some reactions to some news and events. my favorite pairs are EUR/USD/ USD/CHF, USD/JPY.

    #10 Understand the Risks!

    i am blinded for now by the excitement forex bring me so i think i am not see clearly this in some time XD.
    lol!
    this one is great on the thoughts!
    [url=http:Rule 14

  5. #5
    Piplet
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    New traders are really prone to mistakes as they learn how to be successful. Every trader experienced many pitfalls on their trading..

    There are really some huge obstacles along the path to profits and success.

    What's most important thing is that you work on avoiding those pitfalls, learn from your mistakes, practice, learn more and start making more money in your trading.

    One way to obtain success in forex trading is to have a tested approach and identify trading opportunities..

    Here's a good video which i've come accross about forex trading opportunities.. http://youtube.com/watch?v=d9FEHjFMEkc

    I've heard that there are lots who are having good results with it.
    Last edited by pipstrade; 06-22-2008 at 05:41 AM.

  6. #6
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    Default

    Quote Originally Posted by acidguy View Post
    thx for this great post. here i am putting some personal views and opinion of what i have read.

    #1 Avoid Errors in Order Entry!

    thats why i am here trying to get my $25 bonus, some other sites gives too but i prefer winning them here since i can make the perfect entry with fxegypt metatrader.

    #2 Use Only Risk Capital!

    this affected me the last week, i felt really sad losing my microtrading account money for following some "gurus" advisor about the usa payroll number predicted about 127k then came 92K so i will have to risk money. that dollar lost hurts me.

    can i open another microaccount, or get reseted current mine?. thx

    #4 Trade Small!

    big, big mistake i was commiting, many times i have been kicked out of the market for not enough margin when. then some minutes, hours later the market comes to my favor as i was expecting but i am out of game.

    #5 Avoid Trading Too Often!

    sure i have to fix this but as you probably know, an addiction is not hard to beat.

    #8 Trade in the Right Time Frame!

    i am taking this into account too. i have been noticing i am having great success trading at night and not in the day. so i will find out why.

    #9 Trade the Right Market(s)!

    agree, after probably 1 month i am starting to see patterns in some pairs. some reactions to some news and events. my favorite pairs are EUR/USD/ USD/CHF, USD/JPY.

    #10 Understand the Risks!

    i am blinded for now by the excitement forex bring me so i think i am not see clearly this in some time XD.

    trade the right markets..

    and avoid trading to often
    very well documented points
    is it written by you?
    then u r a great person

  7. #7
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    I often place wrong orders. I remember once I opened a position and the position seemed going very well. But after an hour, I found my money did not become bigger and then I found I opened the position in my virtual account.

  8. #8
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    Trade in the Right Time Frame!
    You have a life beyond trading. May be you have a job or go to school. You have family and social commitments. All of these things combine to determine the timeframe you can use. It does not make sense, for example, to try day trading when you cannot not monitor the markets almost continuously. In my own trading, there are times when I can day trade or swing trade (1-3 day position durations), but there are others when I know I won't be able to dedicate as much time to the markets and therefore have to take longer-term positions. You must find a trading time frame that fits your lifestyle.

    this is the best tip i have evver read

  9. #9
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    I feel ignoring #5 always brings me down

  10. #10
    ceestech
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    cool the part i love most is where he says trade with only fund u are willing to loose.

  11. #11
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    Quote Originally Posted by ceestech View Post
    cool the part i love most is where he says trade with only fund u are willing to loose.
    That part is true of any investment. If you consider that you have already lost your money before you make a trade, you can then decide whether you are comfortable losing it, or maybe you would feel better if you only lost 10% and adjust your level of risk accordingly.
    Jafar Calley - Director
    FXOpen AU Pty Ltd
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    AFSL:412871 ABN:61 143 678 719
    http://www.fxopenaus.com

  12. #12
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    Sure because even the brokers with there quest for profits will still advise clients to trade with capital set out for nothing else

  13. #13
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    One really needs to take the time to learn about forex and practice accordingly. The fact that there is a demo account means that you can practice here first before going for a real account in order to prepare yourself.

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    really fast orders and fast disision make your money go also take care about volume of your order comparing with your balance maybe loss is bigger than your balance if your trade volume is big

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    I agree with the number three rule which says: start with enough capital. When you invest good capital in forex, you can be able to make profits easily and less loss than when you are using a low capital.

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