The New Year has begun and many traders have carved our New Year’s resolutions. Often the intentions are good, but history shows that most fail to abide by their own resolutions before January is over. The primary reason is psychology as it is hard to break old habits and takes strength to do so. The start is usually the hardest part which is why so many fail to carry through and make the positive changes they were looking for.
Forex trading and resolutions made in respect to forex trading are the same, it takes a strong will as psychology is a major part of trading. Another hurdle to carry out resolutions is that the impact is not imminent and the same holds true for the results in your forex portfolio.
You know you need to make adjustments in order to increase your profitability and reduce your losses. You may have even identified the areas you need to improve and have a plan on how to do so, but with January winding down you may already have failed to be on track. No need to worry, just take a quick break from trading and revisit the changes you wanted to make.
Take a look at your trading history so far for 2014 and evaluate each trade you made. See how many trades fall within your trading strategies and goals you have set for 2014 and how many do not fit your overall approach. Understand why you took them and how the result would have differed if you would have done what you set out to do.
In addition ask yourself if you are making these 3 forex trading mistakes:
Trading with Insufficient Capital – This is one of the biggest mistakes you can make as a trader. A lot of new traders are focused on profits, but ignore risk management. You need to have sufficient trading capital in order to manage your forex portfolio well. Assume you are taking 2% risk per trade and you only have $100 in your trading account while you are looking for a 2:1 risk ratio. This means you are looking to earn $4 per trade. Add funds to your portfolio so that your hard work pays off. Make a deposit now.
Ignoring Economic Reports – Even technical traders are aware of economic reports. You may not conduct your analysis based on fundamentals, but you should always know when economic reports will be released as they impact currency pairs. Interest rate decisions are amongst the biggest movers of forex pairs, followed by employment reports and inflation data.
Disregard Risk Management – It does not matter how much money you make trading, what matters is how much you can keep and many new traders ignore risk management or adjust it and face heavy losses. Sometimes one big loss can wipe out the entire account which is why it is very important to always stick with your risk management. It is better to lose 2% than lose it all.