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Errors in Trading Environment


One aspect of being a successful forex trader is the environment in which you make your trades. When you are making a trade, and you suddenly lose money, there are a number of questions which may race through your mind.

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You may assume that there is something wrong with your system, or that you should have followed your gut instincts as opposed to following the trading indicator. Despite this, there are times during which you will have to look deeper in order to get to the root of your problems. A number of statistics have shown that out of everyone who participates in forex trading, only about 5% consistently earn profits.

The key thing which separates this elite 5% from the other 95% is that this 5% knows how to learn from their mistakes. A mistake should always be thought of as a time for learning, and one should always keep it in mind so that it can be avoided in the future.

The elite trader understands that a mistake is a lesson which can allow them to perform better the next time around, since they now understand the market more than they did before.

Most traders, particularly those who are novices, will make a connection between the trading mistake along with the outcome (the money they lose).  In reality, the mistake is not that should be focused on. Instead, it is better to remember that a mistake results from not following a specific guideline.

Currency trading, just like everything else, is based on a world of rules. While these rules may not be obvious to you at first, they are there, and when you lose money on a trade, it is often because you broke one of them.

If you spend too much time focusing on the mistake as opposed to the rule you broke, you will not learn from the mistake, and will likely repeat it again. If you are like many traders, it is likely that you use a software program in order to help you facilitate your trades. While these software programs, which often involve technical analysis, can allow you to make a lot of money, this is only true when you follow them.

Importance of Following Your Trading Program

When your trading program gives you a signal to buy, you basically have two choices, and this is to buy or sell. You cannot do both, and there are only two possible outcomes that can result from your trade: you will either make money or lose it.

When you make money, you will naturally be proud of your system and the environment. When you lose money, you can spend time trying to figure out what went wrong, or you can simply accept the loss and vow to make up for it in the future. If you lose money as a result of not following signals when they are given to you, then you only have yourself to blame.

Spending time blaming the investment software is a waste of time. The key thing that you must always keep in mind is that there is no key relationship between the result from trading and mistakes. A good forex trader will always take the time to analyze the rules they broke as opposed to the mistake itself.

It is also important to be cautious when it comes to how you plan the trades. If you are risking more money than you can afford to, this can put you in a dangerous position where you could lose big. Ironically enough, the key mistake that many traders make is not having a plan in the first place, and as the old saying goes: when you fail to prepare, you prepare to fail.

To have an effective trading plan, there are a number of things that you will want to include. First, you will need to set up a checklist for things which are a signal for you to leave the market. You will also want to develop a plan for money management, which will often involve how much risk you are willing to put up on any given trade.

It is also important to have the discipline which is necessary to follow through on your plan once you have developed it. Once you have a plan set in place, you will do much better over the long term, since minor losses here or there will not have much of an effect on your psychology.

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As you trade, one thing that you must always remember is that you will make mistakes, and you will lose money. However, the ways in which you deal with those mistakes will mean the difference between long term success and failure in the forex trading market.

Read Next: Amateur Traders Typical Mistakes




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