The foreign exchange market is global and therefore it is the biggest financial market in the world. There is a lot of money to be made by trading your investment funds on the forex or currency market but at the same time it is an extremely risky way to handle your funds. Just like with other forms of trading, people go into it thinking they will get rich quick and that is not the case at all. The truth is that traders either get rich slow or they lose their money.

So how do you make sure that you are in the percentage of winners? You can give yourself a good start by making sure that you avoid these five big mistakes.

1. Dreaming

Dreaming of riches is the shortest way to ruin when you are trading currency. It is vital not to over stretch but take your profits at the level that you planned. If you are constantly hoping that the next trade will be a 500 pip triumph, you will easily be tempted to hold on until you suddenly find the market turning against you.

2. Regrets

Any time you catch yourself thinking about what might have been, stop that thought in its tracks. This goes right along with dreaming in that if you do not watch out, regret will grab your hand and lead you into ruin. If a trade turns sour, just record it and let it go. And if you think that you cannot let go of thoughts, you might want to try a little meditation.

3. Giving up too soon

Be careful not to give up on a good system just because it goes through bad times. Look to the long term results. It is true that sometimes the behavior of the foreign exchange market changes and makes a previously workable system unprofitable, but if you think that is happening, simply paper trade or demo trade it for a while. Jumping into a new system is not going to solve the issue.

There is no system that works 100% of the time. Losses are part of the process should be accepted as such. As long as your overall results are profitable, do not get excited by successes or disappointed by failures. Treat them both as numbers and keep emotions out of it.

4. Acting too soon

If you are impatient you will not be trading at the right moment and your results will suffer. Impatient forex traders do not wait for the signals to be right but jump in and open a trade because they think things may be about to go their way, or because they have not had a trading opportunity for a while and they are bored. Big mistake!

5. Acting too late

Hesitation, on the other hand, usually happens because you do not trust your currency trading system. You have the signals but you want to wait for another movement or another indicator before you act. If you often find yourself in this situation, you may need to test your system further or reduce your position size so that you do not feel so fearful. Fear will hold you back from making your move in the foreign exchange market at the right time.

Filed under: Forex Market

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