The present Forex market is not what it used to be before decade, before century. It has evolved the same way as people are evolving during millennium but way faster.
To be successful in trading you probably have read a lot of books and maybe you think you know what to do. Let’s assume you have made the best of yourself and succeeded to make a good profit. But this is not everything and only if you withdraw your wining you can claim that you are successful. A lot of traders ( if not probably all of them) think that they can continue winning and making profits the same way as they start and here comes the great disaster. Market is like a hound for such traders it smells the greed from thousand miles. You will probably enter a huge leveraged position assuming that nothing wrong would happen and then it comes, the storm more horrific than Irma. You find yourself with most of the Equity gone caused by some major bank speaker or change in interest rate which was not expected. I am sure that I am not the first one to write about this but this is a reminder for every trader, newbie or veteran.
The best way to keep your Balance positive or at least pink not red is to avoid huge leverage. You can find your best leverage by yourself but jumping to more than 1:30 is a suicide.
This article I will try to give an idea to the psychology traps which it is better to avoid during normal trading.
1st. Trap of adding to losing position.
I suppose a lot of you have fallen in this trap. You enter a position
and then you see that the market moves against you, you double or triple the position and then the market makes a huge gap against you and you lose control adding more and more positions. What you should have done is wait, wait and wait before adding position. Read news during waiting, what has happened and why it has happened? Usually the market is moving absolutely against the logic. For example: We have NFP with reading more than expected and you expect to have USD rising but in reality USD slumps and all pairs against the greenback skyrocket.
The reasons for this are many and it is impossible to explain it here but it is important that if in such situation you have entered a long dollar you should consider putting a S/L or a negative T/P rather than adding a losing position because the dollar will really go long but you will not be alive (your account will be blown) to wait for it. Here I will make a little remark: I am not saying that you will not win in one two three times in such condition but there is always a probability that the price continues its climb without any correction. This is the major problem of ordinary traders – waiting for correction to clear their loses and this is trap number 1 to avoid.
Advice: In the example given above I would recommend to wait until the end of the day (the week also ends there) and close with the lowest possible loss other than wait next week for the correction.
2nd. Trap giving too much credits to winning strategies.
This is something different. There are a lot of very good robots. I also have created successful strategies which have made good profits but in longer term all strategies fall in the market trap sooner or later. It can take months or even few years with successful trading and just when you think to increase the margin it can blow all your profits in a matter of month or even week (why not in a day if there is something like Brexit for example Smile
Advice: If you use robot don't increase the leverage even consider lower it if the successful trade have been long enough. When the storm ends you will have your equity to continue your strategy without losing your profits.
The hardest part of everything I have written here is how to sense the trouble. The way is only one and it is reading the fundamentals. But to really be good in avoiding problems you must know one important thing – The big movements are not happening during the major events. The major events are just the signs for something to happen. The big movement can happen sooner - before a great announcement because of leak of information or could be a planned maneuver by big banks to kill all retail traders before moving in the right direction. They are the shark you are the fish,
so try to be as slippery as possible.
