Understanding Forex Trading – What I Learned Losing a Million Dollars

Forex Day Trading Mistakes to Avoid
The currency market has remained very volatile and we have seen a whole lot of practices that investors use in the market that garner common trading mistakes. Many are errors that intra-day traders get involved in as they surge to make more gains, but end up lower than they started. Investors can avoid some of this trading mistakes by applying the right knowledge, discipline and a firm approach.
Averaging Down
The term averaging down has gotten the attention of every trader and a lot of them have rounded up on it. Averaging down poses some problems, some of which is the fact that a position that has been drawn in the red is being held and at the same time putting funds at risk. Aside of this, we also have the issue of time. Risk and Time are a popular combination and ultimate tool for any trader.
When traders lose money, desperation to recover funds normally bigger funds are required to get back the capital lost. A simple illustration is one that explains the fact that when an investor losses a huge amount of money, it takes a long period of time to recuperate, don’t rush the process, and stay focused on regulated trades.
Sometimes we get unavoidable margin calls or big losses, as we find the market trending even longer than the investor can stay liquid in the market. We find investors adding more capital to positions to help them maintain liquidity in the market. Issues like this are very sensitive to intra-day traders, because they are always looking at short term signals and as such should exit positions that are in red.
News Trading
It is well known in the Forex market that news can drive the market, but at the same time market direction remains unknown. An investor could react too closely to a current news event, but yet he’s unable to predict the market and how it would react to the news. In most cases we find additional statements, numbers or future indicators that would render such news releases very illogical.
The market exhibits volatility as we see orders hit it, stops are being triggered on buy and sell ends of the market. We get whip-saw in the market most times even before the trend comes into play (if it does anyway).
This is why it is bad to take positions before major news events as they can seriously affect trader’s chances in the market. The market does not provide anyone an easy way to making money, the risk you’ll encounter is enormous and you could face huge losses.
Post News Trading
In most cases we find a huge move after a news release and it looks like an easy way to make money. Some common mistakes to avoid lie in following proper investing guidelines, if not followed this can lead to a reckless gamble that would cost a trader lots of damage. We’ve seen traders get whipsaw-like movements when they get into the market during times like this.
Often times we find investors who are trapped in some of the trading mistakes I listed above. These should be preventable via developing alternative trading techniques. For averaging down, investors should avoid adding funds on losing positions but rather close such trades. Investors should at all times sit and watch news events and not take action until the drama calms down. Trading forex can be very profitable if these pitfalls are avoided.