When you look into Forex trading at a commoner’s perspective, you will feel that Forex trading is very complicated and troublesome, especially when you read that risks in this business is always included, thus making you afraid if you are interested in taking a shot at being a trader. But when you muster the courage to become a trader, you may think of the prop firm trading world as complex and complicated with all the things you need to learn.
New Traders Complicating Forex Trading
The first reason why Forex trading becomes hard for a newbie is a lack of self-confidence. This is when you look at sources to read for some tips, tricks, and real rules of the trade. Newbies do not have experience, and you need the expertise of other people so that you do not make a mistake of losing your money. However, one thing ironic is that such tips and tricks being shared to save people from avoiding lapses are usually results of experiences from committing mistakes.
This is where you cannot really decide on taking risks and continually skipping from one system to another. You keep on switching from one indicator to another, not even understanding the nature of the indicator in which you are setting your trading aspects with. You often believe in what you see than knowing the actual behavior of the market by doing the math. You may even end up to a point wherein you are locked on a “paralysis by analysis”.
The second burdensome factor that trembles a newbie is the fear of losing money, which many people are experiencing. This is one eternal truth that must be learned by every trader. Losing is part of the game and you cannot have a 100% chance of being successful, even if you do your best of achieving it.
The Experience of Paralysis by Analysis
It may sound a bit of wordplay, but the whole thought is on its very words. When you are reading and relying too much on indicators, you may be focused on what the indicators will tell you, and not observing where the market is going. You can be surprised if you encounter that moment where merely watching the market trend could have saved you so much time and effort. You have been paralyzed with what you should do because of being too analytical with your market activity.
Simplicity of Forex Trading through Trends
When you get away from the complications of indicators and other in depth reports and readings, you will notice one tool that can make you see the big picture of Forex trading. Watching how trends go in 3 months, 6 months, or 1 year will make you think that this system of trading is never complicated to begin with. There are only two major trends in the market, which is rising up and falling down. When the lines are going from the lower left to the upper right, it is an upward trend. When the trend is from the left up going right down, then it is downward. That should be as simple as you can interpret it.
Reasons For Switching Brokers
There are many reasons why traders change their brokers. Everyone does it at some point or another in his or her trading lives. But is it really necessary to change brokers? The answer to this lies in your needs. It depends upon what you want. Some people change broker if they have been given a short end of the deal or maybe they are not happy with the leverage.
There are many reasons for this, some right and some not so right. However, one of the main and worst reasons why traders switch brokers is that they blame him for their losses. Rather than finding fault with their trading, they feel that the broker could not handle it well. The reason for losses in Forex trading lies not with the broker but with overtrading or overleveraging.
There are other reasons for changing brokers that are quite genuine. Your current broker may be charging a high spread, which is sometime 3 pips for a currency pair. While 3 pips was an accepted spread sometime back, the competitiveness in the market has ensured that 3 pips is now considered to be too high. There are brokers who charge only 2 pips or less and that is more profitable to be trader.
Pips are actually the charges levied by the broker for the services provided. A difference of 1 pip may not seem much but over time, it adds up to quite a profitable amount.
It may also be that your trader does not offer the currency pair that you wish to trade in. Such a reason is also genuine as some currency pairs offer more profits than others. An erratic or slow platform is another reason. While, a slow or erratic speed of trade does not really matter most of time, such a platform can be the reason for a loss, especially when you are closing a trade.
All these are good reasons for changing your broker. However, it would be good to know all about the broker and the trading platform before you choose one. It will save you a lot of trouble. Also, you can make a profit for yourself by taking the help of Legendafx or take a short Forex course. With a little research, perseverance, patience and help, you will succeed in becoming a good trader.
3 Bad Forex Trading Habits
Every time a trader has an adventurous Forex trade with lots of ups and downs, he makes a resolution to be careful the next time and practice a cautious approach. But with the Forex fever in his blood, he is rarely able to keep his promise. These bad habits have been ingrained into him since he was a toddler in the game and he finds it impossible to get rid of them. These bad Forex trading habits can be broadly classified into three heads as discussed below.
1. Overtrading – This is the worst habit that many currency traders have. If you do not have this habit then it is probable that you are a millionaire with the profits that you have made in the market and can now afford to sit back and relax. Or perhaps, you are using the automated system with the stops at both ends.
When a trader places one trade after another indiscriminately and too aggressively without any discipline, it is known as overtrading. When you are chasing the profits, you tend to overtrade. This is an expensive habit and you will find yourself up at all hours of the night and day. The best way to break this habit is to develop a game plan. Having a strategy will discipline you and help you actually earn profits.
2. Over Leveraging – Not many people are aware of what this term means. Everyone has heard of it but thinks that they do not have this bad habit. Over leveraging occurs when you put all your equity in one single trade. When you are glued to you computer screen following every single movement of the trade, you keep on adding money to your trade, till you finally over leverage. Trading requires a discipline and the ability to move away from a trade that is frustrating and come to it when you are in a calmer state of mind. There a three ways to break this bad habit – by having a strategy for trading, placing stops and disciplining yourself to walk away after placing the stops at both the ends.
3. Not having a trading strategy – This is the mistake that all traders, even seasoned ones, make. Not having a strategy or a game plan leads to overtrading and over leveraging resulting in placing more equity on a single trade or opening too many trades. Isn’t it difficult to drive if you do not know the way? Research the market carefully and study the charts before developing your trading strategy.
The best way to trade is to place a trade and then place the stops at both the ends. Now, let the stops take care of your trading limits. You will not indulge in your bad habits and be a better trader for that.