{"id":11172,"date":"2010-07-19T09:11:45","date_gmt":"2010-07-19T13:11:45","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=11172"},"modified":"2010-07-19T09:11:45","modified_gmt":"2010-07-19T13:11:45","slug":"are-these-5-classic-trading-errors-costing-you-money","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/07\/19\/are-these-5-classic-trading-errors-costing-you-money\/","title":{"rendered":"Are These 5 Classic Trading Errors Costing You Money?"},"content":{"rendered":"

By Jonathan Dayan<\/strong> – Every activity you\u2019ll ever try supplies its own list of shameful errors and online financial trading is no different. They\u2019re the mistakes you make which are too obvious or too embarrassing for you to tell anyone else about. They haunt you in your sleep and they hurt you in your wallet. We\u2019ve all made at least a few of them and none of us like to talk about it. But in the interest of keeping these sloppy mistakes under wraps in the future, here named and shamed are the classic mistakes traders make when trading Forex, indices and commodities online. And don\u2019t worry we all make them; regardless of whether we\u2019re starting out or we\u2019ve been in the market long enough to know better.<\/p>\n

1. What\u2019s In A Name? \u2013 Confusing \u201cAsk\u201d And \u201cBid\u201d<\/p>\n

It\u2019s the mistake we don\u2019t own up to but getting confused between \u201cBid\u201d (that\u2019s buy \u2026 I think) and \u201cAsk\u201d (sell) whether you\u2019re trading online or through the phone is all too common. \u201cWhy couldn\u2019t they just name them up and down\u201d is what you may start wondering if you make this costly error. Because in Forex trades a pair of currencies is being traded every time \u2013 one currency bought and one currency sold simultaneously \u2013 it\u2019s the error that\u2019s almost bound to creep in at some point or other.<\/p>\n

What to do when it happens to you: exit the position and learn better for next time.<\/strong><\/p>\n

What to say to your friends: absolutely nothing.<\/strong><\/p>\n

2. \u201cIt Can Also Go Down?\u201d \u2013 Misunderstanding Margin<\/p>\n

Margin, leverage, leverage, margin: sometimes you\u2019re only completely sure about what it all means when one of them is at $0, the other is at 400x and you find yourself wishing it was the other way around. Yes<\/strong>, for the all time future avoidance of doubt, your margin will decline if a trade goes against you and yes you should always keep enough money in your account to cover the scale of the positions you have open \u2013 the more leveraged your positions, the more money you\u2019ll need.\u00a0 Think of margin, the funds in your account and leverage as three friends in a field \u2013 the closer they are together the better everyone gets along, the further apart they move the more quickly your likely to see the friendship fall apart; and realize to your sadness that all three are gone.<\/p>\n

What to do when it happens to you: register for the <\/strong>eToro Forex course.<\/strong><\/a><\/strong><\/p>\n

What to say to your friends: it was a vital experiment within my long term strategy.<\/strong><\/p>\n

3. Oops I Did It Again \u2013 Forgetting Your Stop Loss When You\u2019re Trading On The Fly<\/p>\n

Few mistakes can be more common or more costly than this one. In the middle of a volatile trading session \u2013 with action happening all around you \u2013 it\u2019s easy to neglect your stop loss but it can be a fatal mistake. Once they\u2019re opened, most brokers will keep your trades open until you close them, so if you exit your platform or otherwise forget a trade and leave it to run on, the results can devastate your account. Even if you\u2019re not so unfortunate, keeping unlimited positions open when you\u2019re trading under heavy leverage can very quickly eat into your funds if the market moves against you suddenly. Unless you\u2019re a serious scalper, think twice about opening a position without a stop loss. Never forget that acts of God and acts of technology conspire all too often to leave your account at risk.<\/p>\n

What to do when it happens to you: blame it on lack of sleep and know better for next time.<\/strong><\/p>\n

What to say to your friends: stop loss is for sissies (and so is making money)<\/strong><\/p>\n

4. Too Much Of A Good Thing \u2013 Getting Drunk On Leverage<\/p>\n

Nothing feels so much like easy money as trading under leverage when you\u2019re starting out. Instead of investing with the $500 or $1000 which you thought you had available, suddenly you\u2019re able to start making deals worth many hundreds of $1000\u2019s. That kind of power can easily go to a trader\u2019s head: and all too often it does. Getting intoxicated with leverage is a risky business. Keeping your leverage within a reasonable range \u2013 of between 10 to 50x for the majority of positions you enter will help you develop a more reliable feel for the trading market. It should also shield you from the short sharp market shocks which often leave the 400x leverage trader with nothing left to hold on to but his memories.<\/p>\n

What to do when it happens to you: remind yourself you\u2019re not demo trading \u2013 it\u2019s time to trade sensibly<\/strong><\/p>\n

What to say to your friends: it was only $\u2014\u2013 (fill in as appropriate)<\/strong><\/p>\n

5. How To Lose Money And Alienate Profits \u2013 Setting Your Stop Loss Too Close For Comfort<\/p>\n

As we\u2019ve already discussed stop loss (and also take profit) orders are really important for effective and secure Forex and financial market trading. However, even these faithful tools can let you down in a crunch if you haven\u2019t yet mastered how to use them. The most common error traders fall in to with stop loss limits is placing them to close to their entry points. At first glance this strategy seems to make sense because it offers a way for you to protect your account from unfavourable market movements. In practice, however, the markets rarely run smoothly and even the most favourable trend on an asset which you\u2019re trading will see moments of reversal within the wider positive trend. To avoid you\u2019re trades closing prematurely at a loss make sure your stops are set a fair distance away from the open rate \u2013 a few pips isn\u2019t going to do it. Alternatively, employ a trailing stops approach where you move your stop loss level forward or backwards in-line with the direction of trade.<\/p>\n

What to do when it happens to you: re-examine your trading strategy. If you\u2019re anxious to contain your losses consider reducing the leverage in your trades instead of shortening your stops.<\/strong><\/p>\n

What to say to your friends: I may not have made money but I didn\u2019t lose that much<\/strong><\/p>\n

If reading through this catalogue of errors has left you feeling ready for a Forex refresher course ask your Forex broker what they can offer or visit the eToro website www.eToro.com<\/a><\/span><\/strong> for more Forex hints and tips.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Jonathan Dayan – Every activity you\u2019ll ever try supplies its own list of shameful errors and online financial trading is no different. They\u2019re the mistakes you make which are too obvious or too embarrassing for you to tell anyone else about. They haunt you in your sleep and they hurt you in your wallet. … <\/p>\n

Continue reading “Are These 5 Classic Trading Errors Costing You Money?”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-11172","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/11172","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=11172"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/11172\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=11172"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=11172"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=11172"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}