Many novice traders is wrong in understanding important concepts in forex trading. They trade with his own interpretation of some concepts that they read or hear without examining further, and make it a habit in their daily trading. These concepts relate to effectiveness in order to quickly succeed in forex trading, but because one understands the opposite happened, how trading is not effective and often experience a loss. From the results of a survey of novice traders, they get these concepts from a variety of websites, seminars or from a more senior trader, and assume that everything is correct and should be followed.
Here are some concepts in forex trading is widely misunderstood
1 Trading in high-risk time frames are larger and take a long time to wait for a trading signal
In general, novice traders believe that trading on higher time frame (the most common daily) greater risk because of the distance the stop loss will be wider dati lower time frame. In addition, the lower time frames more opportunities for entry because often provide trading signals.
In terms of greater risk, you need to understand position sizing. If you need to specify a wider stop loss with bigger pips, then you must set the appropriate lot size so that the magnitude of risk in units equal to the value of money you had planned when you are trading on a lower time frame.
For example, if you previously trading EUR / USD on 30-minute time frame and large you risk $ 100 per trade for a 25 pip stop loss, you are now trading on the daily time frame with a stop loss of 50 pips. You should not risk more than $ 100, but your trading lot size is smaller. If you go on 4 mini lots for stop loss 25 pips (per pip is $ 4, the risk of 25 pips = $ 100), now you are trading with 2 mini lots for stop loss 50 pips (per pip $ 2, the risk of 50 pips = US $ 100). To reward level, with a wider stop loss, take profit level would also be great if the risk / reward ratio you use is not changed.
For trading signals that rarely appear on the time frame is relatively high and depends on the method and your trading experience. It is generally not the case, trading signals on the daily chart is more weighty than 30 minutes chart or 15 minutes. Please note that the signals on the chart with a lower time frame (eg 30 minutes, 15 minutes, etc.) are less reliable than daily because there are many 'noise' in it. The daily chart eliminates the noise-noise and image signal is displayed more accurately. Maybe you will be more extravagant with out entering the market at lower time frames. Trading on daily chart prevents you from over-trading, over-analyzing and trading addiction can be fatal. Trading signals motioned for entry, and of course you want a high probability of profit. Trading signal on the daily chart is more rare, but the greater the probability of profits.
2 You should always let profits continue to grow
You would often read or hear the phrase "cut your losers short and let your winners run 'which often appear on these sites and forex seminars. What actually mean and how do you do it? With such an idea in the phrase, many novice traders who do not do anything on their trading positions were already in a state of profit. They thought that the trading position is correct, the market price movement will continue in that direction and usually last a long time before there are definite signs of reversal. They believe in the experience of the seniors who hurriedly exit when the market is moving as expected until the maximum profit earned is not.
Market price movements can not be predicted precisely and accurately. That way chances are 50-50 and gambling. The phrase is general, but logical and objective. To react to it, at least you have to apply money management to determine the risk / reward ratio is reasonable. Additionally, you do not have to forego your trading profit position. You can shift the stop loss level to lock in profit you've earned, or use a trailing stop facility. To be safe, at least you move the stop loss to breakeven levels. Securing profit is crucial especially if the reward level has not been reached.
3 We recommend that you determine the risk per trade is not over 2% of the account balance
Rule 'risk 2%' is commonly known and used by forex traders. If applied with a stiff, this rule actually restricts memange traders in the trading account balance. Traders who have experienced advocate beginners should not be bound by the percentage rate risks. In terms of the magnitude of the risk, a trader should be comfortable with the assigned number. The percentage figures are very relative to funding your account, and the amount in terms of money is more real and apparent (visible). For example, a forex trader who profits '10% 'of the account and the balance is $ 100, while other traders also profit '10%' but the amount of $ 10,000. For novice traders will be easier to see greater profit and loss in terms of money rather than a percentage figure.
Many professional traders suggest that in determining the unit risk per trade using real money, because only you know the magnitude of risk in the most logical unit of money in accordance with the plan, trading skills and your financial situation. There is a tip from the professionals: your funds should be sufficient to cope with 10 to 20 times the losses in a row as the worst case scenario. If not used and experienced, should avoid compounding techniques or tuck the lot size per trade as well as any market condition you expect.
4. Broker you try to fool the (scam)
Forex traders often regarded as his broker. If you are experiencing loss, they always put prejudice on the broker, the broker suspicious mengelabuhinya by playing wide spread, using certain techniques to 'chase' the level of the stop loss (stop loss hunter) or install special software that can access to our trading account. Although there may be a forex broker is like that, but certainly not many. Boker forex is a promising business, and to obtain permission from the regulatory agency has been recognized entrepreneur forex broker must submit a security deposit is not small.
If they cheat or deceive his client and the client to report to the regulatory oversight body (which must be addressed if the evidence is complete), will be able to have an impact on their reputation and business. To be safe you should choose a broker who has obtained the regulation of the regulatory agency such as the CFTC and NFA reliable (United States), UK FSA (UK), FSA (European Union), ASIC (Australia). If you have chosen which broker you can trust, you are not supposed to put prejudice to the broker.
5. release is a very important economic news
With so many economic data releases and news sites were flooded every day forex trader is certainly nothing so just ignore and assume that the data is not of fundamental importance. Traders who rely purely technical analysis in trading (chartist) assume that all the data and due to the release of economic news has been reflected in the market price movements, but in general still need to pay attention to the release schedule several indicators that are considered important by the market participants. It's just that we must be vigilant when trading based on fundamental data releases. Experienced traders do not do it to avoid slippage or jump prices. If you intend to trading on the release of economic data, they usually wait a few moments after the news release on the market conditions are relatively quiet (not too volatile / volatile).
6. systems and trading strategies are the most important aspects
If we try to do a search about methods, strategies or trading system on sites on-line we will find a lot of promotion of various trading software is a ready-made, a robot, or a company that provides trading signals (signal services). Rarely provide education and exposure details about money management and trading psychology, the two most important things in the actual trading in the forex market. The software maker and the trading signals service providers know that many forex traders who tend to seek methods and trading strategies are simple and efficacious (holy grail).
In reality there are 3 main pillars in the forex trading should be noted, that the trading system, trading psychology and money management. Trading systems include methods and strategies, while psychology include mental aspect of trading. These three pillars must stand together, if one of them collapses can destroy your trading. Actually there is no holy grail in forex trading, especially that only rely on trading systems and strategies.
