Dangerous Forex Trading Beliefs

In this article you will find some misleading ideas, widely spread throughout the world of Forex, that lodge in the minds of many traders. These erroneous beliefs become ineffective over time and create patterns of thought that trap traders into a cycle of bad habits. Unfortunately, many of these beliefs are posted on popular websites and media sources and therefore look very much true.

It is Harder and Longer to Trade with Daily Charts

A widespread rumor which is totally misleading is that trading on daily charts creates more risk because of the stop loss that is wider compared to short-term trading.

This implies that you are taking higher risks by trading on H4 or D1 graphics, which just shows a lack of understanding of the position size. If you need to set a stop loss at 100 pips or more, the risk may be identical with a position that has a tight stop. Just adjust the size of your position, for example, a loss of 100 pips on EUR USD with a lot size of 0.10 is $ 100, the loss will be the same with a stop 50 pips and a position size of 0.05 lot.

Another misconception is to say that there is not enough time on higher configurations. The quality of trades is much more important than the quantity. Indeed, most traders lose money, mainly because they trade too often. There are simply not many as many prospect trades with a high probability of success worth risking your hard earned money. The intense desire to make profits quickly and with very little effort, often leads some traders to make trades even when no actual prospects for generating profits actually exist. The amount of trades will not increase your chances of success!

You Should Always Let Your Winning Trades Run

We've all heard the old saying "quickly cut losing trades and let the winners run", but what does that mean? How is it done?

Trying to leave trades run or having unrealistic profit goals, will simply never assist you in generating profits. Many traders end up not obtaining reasonable profits, as they lose any opportunity of winning, simply by choosing to close their trades when the market turns, usually for a much smaller gain or perhaps even a loss. To avoid this problem, some traders use a risk return ratio of 1:2 or 1:3. It is crucial that the exit strategy is planned prior to the trade.

Brokers are Trying to Rip You Off

It seems that many traders believe that brokers are enemies who are constantly trying to cheat you by manipulating the course or chasing stops. There are unscrupulous dealers, but they do not stay in business, most brokers are reputable and look forward to establishing long-term relationships with their customers. Brokers have a financial interest in providing quality service and support to their customers. After all, there is a lot of competition in the forex industry.

I'm not trying to defend all brokers, but let's face it, they are an easy target and they are often unfairly blamed by traders who do not understand that the spread can widen during economic announcements or other similar reasons. In addition, on forums, traders' comments that lost money are usually full of misrepresentations, exaggerations, slander and lies; there is really no reason to pay attention to most of these comments. On various forums, some traders will even post a bad review about their broker after losing a trade (which after all the traders themselves are to be blamed), stating that brokers do not even execute trading orders! Many traders do not want to admit that they are responsible for their losses and unfortunately brokers are the easiest targets. On the contrary, it is very important to make sure that your broker has a good reputation and is regulated by the regulatory agency in your country.

Systems and Trading Strategies are the Most Important Aspect When Trading

There are numerous books on technical analysis, but much less on psychology and risk management. If you do a Google search for "forex trading systems", you will find forex trading software, robots, signals services, etc. You need to be a little smarter and find a solid training on psychology and money management. Why is that? Mainly because most currency traders are anxious and start trading with a strategy they have found on the internet. Regardless of whether it is effective or not, currency traders lose money as they do not have the ability to manage their emotions and risk. Risk management and trading psychology often appear as secondary elements and yet are essential to succeed in trading. The truth is that trading is not very difficult at the level of technical analysis and the various strategies involved, the difference between a business that makes money and a beginner is psychological.

at 8:58 PM
Back to Top