Forex Strategy Trading - 6 Textbook Mistakes to Avoid

One of the best teachers in life is mistakes. Whether you have been wise enough to learn from other's mistakes in the past or had to learn from "the school of hard knocks", making mistakes with money is not something that any of us are anxious to do. There are many mistakes in Forex Strategy trading. The following are 7 textbook mistakes to avoid. These should be used as a starting point in your currency exchange education.
Learning from other's mistakes can only increase your chances of succeeding. There is no good reason to make the same mistakes with your money if you can avoid it. Finding a winning strategy takes work. Incorporate these lessons into your strategy and give yourself the advantage of experience.
1 - Emotions
Forex trading requires objectivity. Once you allow your emotions to enter into decision making, objectivity goes out the window. There is nothing objective or rational about emotions. Since trading well requires the ability to make sound decisions you will do better to stay away from a trade that you are emotional about since it will be tough to make a decision without the influence of those emotions.
As an example of this; if there is a country or currency that you feel strongly about, either pro or con, you are much wiser to avoid trades that involve this particular currency until you can be objective in your own mind. Emotional decisions have no sound basis and to trade well, every decision should be based on the strategy that you follow.
2 - Stops
Stops are an essential part of forex trading. Getting the timing wrong can destroy your strategy. The temptation to jump out when a trade is going in the wrong direction is tempting, but the key is to catch the trade while it is still leaning in your favor. Research your options and do the calculations. Your risk should be at the minimum before placing a trade.
3 - Underestimating Risks
There is always the temptation to over play your limit, with thoughts of instant profit after seeing leverage numbers like 300:1 on a trade. Keep in mind that the higher the leverage spread, the higher the risk. Asses your risks as well as the potential gains. Don't let the temptation guide your decisions. Even experienced traders are careful to risk only 2 to 3% of their investment balance on a given trade.
4 - Signals and Indicators
Don't be fooled into blindly following the signals and indicators. Remember that these are just cues to help with your decision making. They are not a magical formula, able to apply your strategy and assets for the ideal decision. The indicators of the moment may not apply to your unique situation. You still need to work to ensure a sound decision.
5 - Day trading
Day trading is appealing because it is easy to think that it holds fewer risks or none at all. All trading is risky; there are no guarantees for your money. Long-term trading gives you more time to wait it out a position for it to come back around to your favor. Day trading offers a quick turnaround on your money. Both options have advantages, but the long-term trading is still the more secure of the two investments.
6 - Software
There is no limit to the number of software programs available for Forex strategy trading. They all say basically the same thing: "you can beat the system and reap huge profits with this program". There are some that are actually pretty good, but many more are not worth the money that you pay for them. There is no software that is foolproof. When you get a software program, be sure to test it thoroughly. Know what the limitations are and do not rely on software for your final decisions.
Although some of these may seem like common sense, it is easy to fall into any or all of these trading mistakes. For your best results, be sure to develop a sound strategy and follow it.


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