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Worst Times to Trade Forex

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Roughly 95 percent of all forex traders lose money. This is a sobering fact, but you don't have to become a statistic. While it's hard to make money in forex, it's not impossible. Discipline, and avoiding common (and stupid) mistakes will put you light years ahead of other traders.

Trading When You're Tired or Emotional

Don't trade when you're tired. Don't trade when you're emotional. Both of these seem like common sense, but many traders extend their trading sessions too long to meet their daily profit targets. You should try to meet your target but only when you're calm and clear-headed.

Trading For Revenge

You're going to lose money in the forex market. It's a fact of life. Many traders make the mistake of trying to “get revenge” on a losing trade though. This mistake is the natural effect of trading emotionally. The market doesn't care whether you win or lose money. Use trading software that gives you firm entry and exit positions. Stick to those positions and do not deviate from your personal trading rules, ever.

Trading In Thin Markets

The New York session runs from 9AM to 5PM. When that closes, you have the option of trading in other markets in New Zealand and Australia. However, these markets are thinner. In other words, there's less liquidity. The price spreads might widen significantly. If you do trade during these times, you should adjust your entry and exit positions accordingly.

Trading When You Don't Have The Money

You should never trade with more than 1 percent of your total savings. This helps ensure that you don't overextend yourself in the markets. In forex, you are allowed to trade on market with leverage in excess of 100 percent in some cases. Even when the leverage is 100 or 50 percent, you could lose more money than you have in savings. Limiting your losses so that you can absorb them with your savings (even if you lose all of it) will prevent you from owing the brokerage money that you don't have.

Trading Shortly After News Breaks

New stories sometimes cause a flurry of trading to begin. Let novices trade on this information. News stories can produce a whiplash effect in the markets and make it difficult to tell which way a currency is moving. It's best to stay out of the market during this time since you can't make an accurate prediction of where the market is headed.

Trading Outside of a Trend

You've probably heard that “the trend is your friend.” It's true. Forex trends are how professional traders make money. Amateur traders don't trade inside of a solid trend and hope to “get lucky.” Confirm a solid trend with your broker's trading software. Find a solid resistance level and then set your entry point. A rational exit point may be 4 or 5 pips from your entry point. A solid trend will let you skim profits from the market without taking wild risks.

Choose a Good Broker

Brokers can sometimes make or break your profits, even when you adopt a good trading strategy. The first thing you want to check is the trading platform and interface. You should be comfortable using it. Next, look for a broker with in-house customer support – not all of them have this. Make sure you ask about your broker's liquidity, and make sure your broker accepts a payment method you're comfortable with.

Author Bio:

Guest post contributed by Stacy Pruitt, a freelance forex strategy and finance writer. Stacy writes about advanced trading and forex indicators. She writes for various online publications where you can go to learn more about forex trading.

 

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