Avoid Being Caught by These 3 Mistakes in Forex Trading

By Joshua Geralds

Rookie traders are traders that lose money and they keep losing money because they never understand the mechanics of trading well. Are you a rookie trader? Are you focusing on the wrong areas of Forex trading have you been caught by these 3 mistakes in Forex trading? These mistakes are (1) over leverage, (2) Greed, and (3) lack of a proper money management system. Let us explore more on these 3 mistakes and how you can avoid them.

(1) Over leverage

Over leverage is one of the biggest mistakes a rookie trader can make. Leverage can be simply defined as the amount of money you borrow from the broker to trade. It ties in hand in had with margin. These 2 terms are not the same and should never be mistaken as interchangeable terms. Leverage is a double edge sword; while it can magnify your profits it will also magnify your losses. For instance if you have a leverage of 1:100 that means your gains are magnified a 100 times, it also means your losses are magnified a 100 times. The problem comes about when we throw in a margin call. Margin is what you use as a guarantee to borrow money to trade. That means what you have in your account is margin (your own money). When you over leverage you get more margin calls. The broker in a bid to protect its own interests will automatically shut down any positions you have open if your total margin falls below an acceptable limit. That's not good especially if you have a lot of positions opened and some of those positions are actually making money.

(2) Greed

Another big mistake many rookies make is that they cannot overcome the greed instinct. It is natural to be greedy as a trader. We humans are born greedy, we always want more and we want it instantly. In forex trading this kills more often than any other mistake. What happens is that rookie traders will try to force the market to give more than what it can naturally give! If the set up of the trading plan does not have all the conditions fulfilled, due to the greedy nature of humans we force the trade and then we pray that this trade is a successful trade. This will kill your account quick! You might be lucky once or twice and make money but after a while the losses will set in and it will be a downward spiral towards an account wipe.

(3) No money management

The lack of a money management plan is another of the 3 mistakes in Forex trading that catches rookie traders hard. In fact most traders focus on making more pips and do not consider protecting their account an important thing at all. After you have lost you account a couple of times, you will understand the beauty of money management. The trader that can make 5 or 10 losses yet still grow his or her account at the end of the day is a successful trader. The trader who makes large sudden gains and makes equally spectacular losses will lose an account double quick time.

In conclusion, avoid being caught by these 3 mistakes in forex trading and you will be able to grow you account consistently and surely. This is the only way to riches in Forex trading.

Dr. Joshua Geralds is a successful Investment Specialist with over twenty years experience increasing the income of people world wide. Visit http://www.pipsalot.com to learn how to make steady profits through safe trading and down load your FREE e-book "Money Management" for a limited time only!