Some common Online Trading mistakes made by Day Traders engaged in Forex Currency Trading

Online Trading for a great living standard is probably the number one reason that attracts many day traders to forex currency trading. Day Trading also offers  many benefits that can never be matched by almost any regular jobs out there. But, it is also a deadly trap that many newer traders fall into if they come totally unprepared for the task ahead of them. All traders make mistakes and do learn from them, and then there are traders who keep making the same mistakes over and over again and never seem to learn from them. Below, we take a look at the five most common mistakes made by the new trader.

(1) Lack of a properly designed Trading Plan : Most new traders start forex trading or currency trading without any kind of a trading business plan in place. That is a very serious mistake made by those new to trading. Every business out there is built on and thrives on proper planning and having a solid game plan in place. Every trader must know in advance how much risk they are willing to take and the amount of risk capital they are willing to trade with. Traders must stop looking for the Holy Grail and try to get good at one or two setups and execute them flawlessly in real time on a daily basis. A trader must also plan to cut his losses off quickly and hang on to his winners as long as he possibly can. By not carefully planning out their trading, traders often set themselves up for failure pretty quickly in this profession.

(2) Failure to Preserve Trading Capital : Trading Capital is the backbone or foundation of the trading business. Without it a trader cannot trade properly to make the profits he desires or wishes for. That is why it is so very important for a day trader to preserve his trading capital under any circumstances. Trading Capital Preservation will guarantee a trader of his or her survival many years down the road. The best way a trader can do this is by always taking a few unavoidable small losses along the way and moving on to the next trade rather than try to make up for losses in one single trade as there will always be winners down the road also.

(3) Improper and inadequate Risk Management : Managing risk should always be the number one priority, job and goal of the successful day trader. This is done by proper position sizing each and every trade. A trader must always have a fairly decent sized account to focus on and trade the instrument of his choice without having to worry about running out of cash on the next trade. This simply means that the trading account should be able to withstand a string of losses in a row without cleaning out the trader’s account or completely draining the trader in both, mental and physical ways. A trader must never use up all the margin available to him or her in a single trade. And a trader must always avoid the trap of over-trading the account. A typical day trader should look to take no more than two to five good trade setups in any single day.

(4) Lack of Patience and Discipline : Discipline and patience are very important virtues that need to be possessed by all traders at all times. They are probably the most common traits possessed by the very successful day traders. Discipline can be seen in many shapes and forms. A trader must always be disciplined in his approach to trading. Discipline starts off by having a solid trading plan in place and following that plan during live trading. A trader must also have the discipline to accept small inevitable losses when they come and must also take pre-determined profits when called for in the trading business plan. Fear and greed are deadly emotions that can cause a trader to have total disregard for discipline. Discipline is also the art of dealing with the stress that comes with the loss of trading capital. It is very difficult to trade and succeed without proper discipline. A trader must also have a lot of patience in him or her. They must be able to sit for hours at a time sometimes without getting the urge to pull the trigger.

(5) Not using properly placed Trading Stops : Using properly placed trading stops is the key to trading success. Trading stops go hand in hand with risk management and trading capital preservation. A well positioned trading stop helps the trader get out of a losing position without thinking too much or risking too much either. It is a part of most of the execution platforms available in the market today. A trading stop tells a trader that their analysis of the market was wrong. A trading stop can be based on the amount of money (usually a fixed dollar amount) a trader is willing to pay the market to find out if their analysis of a market is right. Having stops placed automatically by the platform helps build confidence in a trader as they know they will not have to think too much when the market moves against them by a certain dollar amount. They know that their platform will take them out of the position automatically when the stop is triggered. After all, the first loss is almost always the smallest loss.

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