Common mistakes of Forex traders

 

“Only fools learn from their mistakes, the wise man learns from the mistakes of others.” Have you ever heard this saying?

We have gathered the most common mistakes that traders make. Avoid your own mistakes, learn from the faults of others!

1. "Fail to plan and you plan to fail"

Everyone knows that it is quite difficult to do something without planning. We will tell you even more: it is impossible to trade without a plan.

A trading plan is a set of rules that consists of your trading strategy and money management strategy. A plan will help you determine when to enter a trade, how to exit an unsuccessful trade, time to reach your target, the amount of money to risk. Without this knowledge, you will definitely lose.

2. Not having a Stop Loss

Even if you are 100% sure of your profit targets, you should better set a Stop Loss. The Forex market is highly volatile, and urgent news can lead to the turn of the trade. In January 2015, the Swiss National Bank suddenly abandoned the cap on the franc’s value against the euro, and EUR/CHF fell by 30%. This event took everyone by surprise. Many traders who didn’t have Stop Loss orders in place suffered great losses. If you do not have a Stop Loss, you may just miss the moment of the turn that will lead to a disaster.

3. Adding to an unprofitable trade

Sometimes traders are so sure in their trading targets that they are blind to the reality. Imagine that you opened a buy order, but the market moved down. You, however, are so sure that you made the right thing that you increase the size of your position in hope that the price will soon reverse up. In a situation like you just multiply losses. If you have an open position, you lose the ability to make unbiased judgments and your actions become chaotic. As a result, never add to a losing trade.

A similar thing happens when a trader increases Stop Loss during an unprofitable trade so that the trade doesn’t close with a loss. Stick to your initial decision. Otherwise, your loss may become bigger. If it was a wrong decision, analyze what went wrong after the trade closed, learn from this trade and use this knowledge to make a better trade next time.

4. Lack of risk management

Traders who do not manage their risks, risk losing everything. Traders can’t allow themselves to think only about profits. You should always count how much money you risk losing per trade and per day. If you keep your potential losses limited, you will be able to stay in the market for a long time and thus have many more opportunities to earn. Stick to the rule: 1% risk per trade. Nothing should distract you from this rule.

 

5. Ignoring news releases

Every trader knows that certain events and data releases affect the Forex market. If the actual economic indicators differ from the forecast levels, currency pairs become very volatile. As a result, all traders, even those who choose not to trade on news, have to take into account the news. Ignoring the news is a serious mistake that can be easily avoided if you plan your trades and consult the economic calendar.

6. Correlated pairs

Traders often try to take multiple day trades, but many of them don’t take into account currency correlations. It may seem you have good chances to earn money on several pairs but be careful: if you see a similar trade setup in multiple pairs, it’s likely that they are correlated. So it means you can win or lose on all of them at the same time. For example, USD/CHF and USD/JPY have a significant direct correlation: when the first one goes up, the second one will likely strengthen as well. So, when you buy both pairs at the same time you double your risk.

7. Trying to avenge yourself

Losses are hard for everyone, especially newbies, so they try to have a revenge on the market. Usually, revenge trades are 2-3 times bigger than a previous losing trade. As a result, they lose even more. Losses are inevitable. Focus your energy not on the revenge trading but on the analyzing of the unsuccessful trade and improve it in the future.

8. Lacking education

The lack of the education leads to the trading blindness and losses. If you want to have profitable trades, you should always improve your skills. If your goal is to be a successful trader, read educational books, learn new indicators and practice new strategies.

To make a conclusion, you will definitely make different mistakes while trading. There is one more saying: if you are not making mistakes then you are not doing anything. However, if you avoid the common mistakes mentioned in this article, your trading will become successful faster.

Do you know what candlesticks tell you?

 Candlestick charting is a popular technical analysis tool used in finance to represent the price movement of an asset, such as stocks or currency, over a certain period of time. There are several types of candlesticks that can indicate the balance of power between buyers and sellers in the market.

✔️ Candlesticks with buyers in total control: This type of candlestick shows that buyers have completely dominated the market and pushed prices up. The candlestick is typically green or white and its body is long.
✔️ Candlesticks with buyers in control: This type of candlestick shows that buyers have the upper hand, but not as strongly as in the first type. The body of the candlestick is shorter and there may be some upper shadow.
✔️ Candlesticks with active sellers but stronger buyers: This type of candlestick shows that while sellers are trying to push prices down, buyers are able to keep prices up. The candlestick has a long upper shadow and a short lower shadow.
 ✔️ Candlesticks with buyers winning but showing weakness: This type of candlestick shows that buyers were able to push prices up, but only slightly and with difficulty. The body of the candlestick is short and there may be a long upper shadow.
✔️ Candlesticks with sellers in total control: This type of candlestick shows that sellers have completely dominated the market and pushed prices down. The candlestick is typically red or black and its body is long.
✔️ Candlesticks with sellers in control: This type of candlestick shows that sellers have the upper hand, but not as strongly as in the fifth type. The body of the candlestick is shorter and there may be some lower shadow.
✔️Candlesticks with active buyers but stronger sellers: This type of candlestick shows that while buyers are trying to push prices up, sellers are able to keep prices down. The candlestick has a long lower shadow and a short upper shadow.
✔️ Candlesticks with sellers winning but showing weakness: This type of candlestick shows that sellers were able to push prices down, but only slightly and with difficulty. The body of the candlestick is short and there may be a long lower shadow.

It is important to note that interpreting candlestick charts is not an exact science and should be used in combination with other technical analysis tools and market indicators.

Learn more about candlestick patterns here 

 

8 Rules Successful Traders follows!

 🔥 Every trader follows some rules that help him achieve goals and targets. Here's our list, share your in the comments:

⚠️ Your capital is the only thing keeping you in trading. Set yourself a threshold of capital loss when you stop trading real money and start practicing on demo to prevent liquidation.

🛑 Did you lose 5%-15% of your capital in one day? Stop trading and think about the mistakes made. The market isn’t going anywhere, and you will always find a situation to trade.

💵  Trading is fun, entertaining, and enjoyable. However, it’s not a game, and you are not a gamer. Trading is a serious job that may make you financially free. Treat it like a business, where profit depends only on you.  

🧑‍🎓 The financial world is a dynamic and ever-changing place where you will be constantly finding new things and learning on mistakes. Don’t stop learning.

❌ Stop Losses are critical for almost all traders to succeed. Although Take Profits help you take your portion of the market, Stop Loss limits your casualties, thus, decreasing your chances of losing everything.

🌐 Found a great technical indicator? Test it! Managed to create or set up a trading robot? Great job! Technology is amazing for traders, use them in your favor.

📍 Can you call yourself a trader if you don’t have a trading plan? This set of rules explains everything in your trading: from entry and exit points to risk-reward ratio and other vital components. Never forget your trading plan.

😌 Always be ready to lose what you’re putting in the trade. Acceptance of this fact will make you more emotionally stable.

How to Scalp in Forex Market : A Simple Definitive Guide

In this overview, we will discuss what is scalping and whether this strategy suits everyone. Scalping is a popular method of short-term trading in Forex with the use of leverage and low spread.

What is scalping?

The definition of "Scalping" means a short-term intraday trading strategy with a short period of time.  Scalping make a lot of intraday trades – short and with modest goals. The technique consists of quickly “cutting” small profits off the price movement of certain instruments.

The option of availability of Leverage  has made scalping quite a popular strategy. A small fluctuation by a couple of points can bring the trader a serious profit thanks to large leverage. Scalping is perfect for traders with a small deposit that does not allow for long-term positional trading. For scalping, we use small timeframes: M1, M5, M15.

Unlike many other strategies, scalping requires much time and effort. You have to keep a close eye on the market the whole day, find entry points, and make trades. Potentially, scalping can bring large profits, but in practice, it requires a well-tried trading strategy and psychic and emotion stability.

Who is scalping suitable for?

Scalping does not suit everyone. The profitability of each trade is usually low, and a significant profit is reached by aggregating the small profits from multiple trades. A scalper must be patient to wait for their effort to bring fruit. To become a successful forex scalper, one needs self-control, attention, and discipline.

Scalping requires much more time and accuracy than any other strategy, such as swinging or trading the trend. A typical scalper opens and closes dozens of positions during a typical trading day. For some people, such a task might turn out overwhelming.

 Advantages and drawbacks of scalping

Let us have a look at the positive and negative sides of scalping in Forex.

The advantages of scalping

• The strategy is potentially profitable both in the short and long run;
• You do not need to wait for a trend to form in the market. You can scalp any time: by trading the trend or trading counter trend, or in a flat market condition;
• Market analysis becomes simpler. You use technical analysis and indicators to estimate short-term trends; fundamental factors are accounted for selectively;
• It is suitable for trading on small deposits. Thanks to leverage, you can open significant positions and make profits even on a moderate deposit.
  

 The main disadvantages of scalping

• Choosing a decent broker is difficult. You need advantageous trading conditions for scalping: minimal spreads and commission fees, no critical slippages. Not every broker can provide all this;
• An increased risk connected to large leverage: even a small market move against the trader can result in serious losses,  this is why you need to use the rules of risk management;
• You spend a lot of time and involve deeply in your trading. You have to keep an eye on the market constantly because you open dozens of positions. Scalping take up much of your energy and might end in a professional burn up.
  
• A limited number of available trading instruments. Not any instrument suits scalping. To decrease expenses from a large number of trades, choose assets with minimal spreads.
  

How to succeed in scalping?

To increase your chances for success, you will need the following.

1. A tried and reliable trading strategy

It is the main instrument of a scalper that helps to make a stable profit. You can make a random profit several times, but without a proven strategy, a trader is destined for misfortune in the long run. Hence, start with testing your strategy on a small deposit demo account.

2. A trustworthy broker with suitable trading conditions.

The trading conditions provided by the broker influence the results of scalping tangibly. Apart from being reliable and having a license, your broker should be loyal to scalpers and provide high-quality services. A high speed of order execution, low spreads and commission fees, acceptable slippages are the criteria that a scalper should check.

3. Suitable instruments

Not all instruments suit scalpers. The most popular ones in Forex and majors, because they boast minimal spreads and commission fees. You can also use certain cross-rates, as for exotic currency pairs, their spreads are too large.

4. Right time for trading

The timing to trade a trade is also important. Analyze your strategy and decide at what time of the day it works the best. Or, it may yield the best results during a certain session: Asian, Pacific, European, or American. If so, try to trade at this time.

5. Analyze your trading statistics

Investors say that you previous success does not guarantee success in the future. Hence, you need to analyze your trading regularly, shooting troubles. A useful instrument is a trader's diary. It can increase your discipline, find mistakes, and master your trading style.

Trading strategies for scalping

Nowadays, you can find plenty of scalping strategies on the net. Still, approach every strategy individually: one trader prefers an empty price chart, another one enjoys indicators, the third one sticks to automatic trading.

Choose your strategy based on your preferences and test it well on a demo account before trading for real. Now let us discuss three strategies meant for scalping.

 2 Moving Averages Scalping Strategy

This is a scalping strategy using 2 simple moving averages of 20 period and 50 period, a signal bar indicator (to observe trend strength) and in subwindow StepAbsoluteQQE indicator for filter entry and exit signal. It can use on 1m and 5m chart.

Example of the strategy setup :

Bottom line

Scalping is a popular way of trading in Forex. It helps to make a good profit even on small deposits but requires much effort and durability from the trader. You need all the conditions to be met (the strategy, broker, etc.) and to control risks to succeed.

 

 

 

 

 

 

 

 

 

Currency pairs volatility

 Following US FOMC rates announcement, here are some chart showing the big move after the news.

It is possible to trade the news to capture 20pips or more but expect bad slippage and re-quote from broker.

A brief Introduction About Regression Channel

 A regression channel is a technical analysis indicator that attempts to forecast where a stock might go next. Watch this video to learn how this indicator might help you determine potential entry signals and price targets, and what price to consider when setting a stop order. 

Watch the video :

Something Interesting to Read : Mastering the Market Cycle By Howard Marks

 

A Note to Readers from Howard Marks, author of Mastering the Market Cycle

Investors clearly could do much better if they knew what lies ahead. But they can’t. Few people can accurately predict what the future holds in store for the economy and markets, and fewer still know enough about these things to out-think and thus out-invest the general consensus of investors whose views are incorporated into – 'discounted by' – the market prices of securities. But we know economies and markets follow an up-and-down pattern called a cycle and, importantly, knowing where we currently stand with regard to the economic cycle and the market cycle can give us a better idea of what lies ahead. This is a process through which investors can get the odds on their side.

When the economy is just beginning to recover from a slowdown and the markets are picking themselves up off the floor after a bust, it’s highly likely that security prices haven’t been lifted to precarious levels by large doses of investor optimism.

Pleasant surprises are more likely to lie ahead than disappointments; investors will probably come to be persuaded of these things over time and thus become buyers; and their buying should cause security prices to rise. At such a point – when economies and markets are low in their cycles – good things are more likely to lie ahead than bad things.

Since security prices aren’t inflated, buying at that point is likely to make for significant appreciation and entail little risk.

And on the contrary, when the recovery and bull market have been rolling for a while, investors are likely to be feeling good, and their optimism is likely to be incorporated in security prices.

Thus prices may be at risky highs; disappointments are more likely to lie ahead than good news; and thus risk may be high and appreciation hard to come by. All these things mean that when we’re high in the cycle, the odds are against you. When others feel good and drive prices to highs, it’s time to cut risk and take some of your money off the table.

In all these things, the operative words are 'likely' and probable.' So while we can’t know what the future holds, we can have a better idea whether the wind is at our back or in our face. The best investors have a sense for where we stand in the cycle and thus whether it’s time to build more aggressiveness or more defensiveness into their portfolios. This book will teach you what cycles are, what causes their rise and fall, and thus how to tell what investment moves are most likely to succeed. 

 

Buy The Book Here