Forex Currency Trading

If you have been trading forex for awhile and you find yourself just struggling with losing trade after losing trade, you might find that a trip back to the basics will help you regain some focus.

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Surviving The Markets

Forex trading can be daunting as well as wildly rewarding. On the flipside, plent of money can be lost in a matter of seconds. Emotions can run very high during volatile trading. There are a few simple things you can keep in mind that will help you succeed and stay in the game when the markets are wild.

1. Avoid catching a falling knife

Trying to pick tops and bottoms is a number one mistake. In wild markets, a couple of “failed hits” can cost you tremendously in a very short period of time. Stick with the trends that are obvious, don’t try to predict the turns before they happen.

2. Trading Small is Better

It can be tempting to make a large trade to try to reel in the big score. The problem is when markets are crazy and lacking they can backfire or whipsaw without warning. If you are trading small, it will give you more tolerance for dealing with market noise.

3. Place stops cautiously

Stop placement in a wild market can be tricky. You don’t want to place your stop too close to the action and get stopped out too easily, but you don’t want to place it too far out and chance a heavy loss. Placing your stop is a personal decision depending on your trade size and risk tolerance. Give your trade some room to breathe initially and move your stop close to the action as it becomes appropriate. Never move your stop further away thinking price will turn shortly.

4. Stick with one direction

When trading is moving back and forth so furiously, it is tempting to try to trade both ways and make twice the profit. This can be really dangerous because you can end up stuck trading the wrong direction at the wrong time. Stick with the overall trend and don’t change directions until you are confident that the trend has changed.

5. Get out when the market is at extremes

When prices are crazy and reaching levels you never thought you would see, it is a good time to consider getting out of your trades and taking some profit off of the table. This is not to say that the market may not come back to this point, but it will allow you to collect your profit at a good point and it will give you a chance to step back and evaluate the situation.

Dealing with Trading Anxiety

Trading anxiety can be a problem for traders that have suffered from serious losses. Anxiety can cause a loss of confidence, fear of mistakes, and take away your ability to be objective.

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Reasons Why Forex Traders Lose Money

It’s commonly known that most forex traders fail. In fact, it’s estimated that 96 percent of forex traders lose money and end up quitting. To help you to be in that elusive 4 percent of winning traders, I have compiled a list of the most common reasons why forex traders lose money.

1. Low start up capital
Most forex traders start out looking for a way to get out of debt, or to make easy money. It is common for forex marketing to encourage you to trade large lot sizes and trade highly leveraged to generate large returns on a small amount of initial capital. You must have some money to make some money. It’s possible for you to generate outstanding returns on limited capital in the short term. However, with only a small amount of capital and outsized risk, you will find yourself being emotional with each swing of the market and jumping in and out and the worst times possible.

Solution:
People that are beginners in forex trading should never trade with only a small amount of capital. This is a difficult problem to get around for someone that wants to start trading on a shoe string. $1000 is a reasonable amount to start off with, if you trade very small. Microlots or smaller. Otherwise you are just setting yourself up for potential disaster.

2. Failure to manage risk
Risk management is key to survival. You can be a very skilled trader and still be wiped out by poor risk management. Your number one job is not to make a profit, but rather to protect what you have. As your capital gets depleted, your ability to make a profit is lost.

Solution:
Use stops, and move them once you have a reasonable profit. Use lot sizes that are reasonable compared to your account capital. Most of all, if a trade no longer makes sense, get out of it.

3. Greed
Some traders feel that they need to squeeze every last pip out of a move. There is money to be made in the forex markets every day. Trying to grab every last pip before a currency pair turns can set you up to lose the profitable trade that you are sitting on.

Solution:
It seems obvious but, don’t be greedy. It’s ok to shoot for a reasonable profit, but are plenty of pips to go around. Currencies move every day, there is no need to get that last pip. The next opportunity is just around the corner.

4. Indecisive Trading
Sometimes you might find yourself suffering from trading remorse. This happens when a trade that you open isn’t immediately profitable, and you start saying to yourself that you picked the wrong direction, and then you close your trade and reverse it, only to see the market go back in the initial direction that you chose.

Solution:
Pick a direction and stick with it. All that switching back and forth will just make you lose little bits of your account at a time.

5. Trying to pick tops or bottoms
Many new traders try to pick turning points in currency pairs. They will place a trade on a pair, and as it keeps going in the wrong direction, they continue to add to their position being sure that it is about to turn around this time. If you trade this way, in the end you end up with much more exposure than you planned, and a terribly negative trade.

Solution:
Trade with the trend. It’s not worth the bragging rights to pick one bottom out of 10 attempts. If you think the trend is going to change and you want to take a trade in the new possible direction, wait for a confirmed trend change.

6. Refusing to be wrong
Some trades just don’t work out. It’s human nature to want to be right, but sometimes we just aren’t. As a trader, sometimes you have to just be wrong and move on, instead of clinging to the idea of being right and ending up with a blown account.

Sterling fell on Tuesday, hovering near a five-and-a-half month low against the euro after a survey showed a sharp slide in UK retail sales and as investors awaited UK inflation data at 9:30 a.m.

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