October 24, 2013

How to Identify Forex Live Trading Mistakes

This article looks at foreign exchange trading mistakes and how to identify them when trading on the forex live market.

Forex Live Trading Mistakes

The majority of forex traders see trading losses as a mistake.  However, this is an unrealistic belief as mistakes should be viewed as trades that are lost due to factors which you can control.  Unforeseen, uncontrollable losses should not be viewed as mistakes as they are due to unexpected market movements.  The path to effective trading is through identification of your mistakes.

Identifying trading mistakes on the forex live market

A forex live trading mistake can be identified as when you break the trading rules you have set for yourself.  Every beginner trader is required to develop a trading plan for how they trade and limit all variables in trades.  Once the forex trading plan is created, it must be tested and implemented.  These trading plans can be either simple or complex according to your trading style.  However, it is advised that you keep them simple in order to keep the plan easy to use and navigate.

A forex live trading plan allows you a degree of control in an unpredictable, uncontrollable market.  On the foreign exchange market, trading behaviour is the only variable you can control.  The majority of traders feel that trading without a plan is a great trading mistake.  Without a trading plan any profitable trade will be difficult to replicate as you have no parameters to follow.

The trading rules

In order to reduce trading mistakes you should develop a personal trading plan.  These trading plans are rules that offer guidance on how to trade.  It is highly recommended that you have various trading plans for different forex live market conditions and strategies.  This is advised as you cannot alter the market movements but you can adjust your behaviour accordingly.

The forex live trading plans are required to overcome all barriers when placing a trade on the foreign exchange market.  You must include rules to cover all trade sizes as this can change the way you should be trading.  The largest trading mistake one can make is to have a strong plan and diverge from it.  This trading mistake will lead to detrimental losses via emotional reactions to trading results.  This is known as emotional trading and is very dangerous to both experienced and new traders.

There are various aspects that your trading plan must cover including what time of day you should trade.  This will change dependent on the trading strategy you are using and the currency pair you are using.  It is important you review your plan regularly to determine whether they are still relevant to the market and your trading style.

New traders are encouraged to review and test a trading plan before implementing it.  This is generally because a plan may be developed and used only to find certain aspects do not work.  By changing these aspects, you can avoid making any trading mistakes in the future.



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