Common Mistakes Made by Novice Forex Traders

Although forex trading isn't a complex process procedurally, there are things you need to learn about the market to avoid making financially painful mistakes. Never enter the forex trading market until you are armed with knowledge of the market, how it acts and why the pros trade the way they do. This preparation could mean the difference between great profit and great loss.

Follow these rules to avoid the most common forex trading mistakes:

1. Be humble enough to learn how the market really behaves. Don't storm in with the idea that you'll "beat the system" with your new way of looking at the trends or events affecting a particular pair or trade. You may be smart. You may even be smarter than half the traders out there. But that very intelligence can outsmart you! Ego is unwanted and unappreciated in forex trading. It will get in the way of you seeing the market the way it REALLY exists, instead of the way you BELIEVE it exists. A person who studies and learns these movements will beat an overly-eager investor bent on "beating the system" every time.

2. Be accountable for your own trades. If you follow a system or a guru who has promised you untold riches, you're heading down the wrong path. They all claim to make you rich, but none of them can guarantee it. You need to take responsibility for your own financial transactions and protect yourself from any fallout. This means, among other things, only investing what you can afford to lose.

3. KISS = Keep It Simple, Stupid! Some forex traders and books on forex trading present the idea that the more complex a system is, the better it will perform. Nothing could be further from the truth! In this world's fast-paced economy, changes occur at a rate too fast for a complex system to adjust and keep up. Use a simple system and make money. Complicate it and fall behind.

4. Patience, patience, patience! You need to stay objective and focus on those indicators that define trends. Many new traders will jump into forex trading with a certain system they've bought. When it doesn't make a profit for them, they jump to a different strategy and then another. They never really achieve measurable success. Instead, you need to have patience. ALL STRATEGIES FAIL SOMETIMES! This is important to keep in mind. There are normal fluctuations in the forex market as in any other financial market. Bad periods are followed by good periods. Stick with your system through the minor bad spots until it performs for you again. Decide ahead of time where your exit points will be and stick to it. You'll be more successful in the long run.

5. Last, but not least, avoid too much subjectivity. Use technical analysis, Forex charts and the like, but don't become dependent upon them exclusively. Avoid methods that use cycles instead of indicators of trends. Good indicators to use are MACD, RSI, moving averages, stochastic and Bollinger bands. These will keep you focused and emotion-free.

SOURCE:http://ezinearticles.com/?Common-Mistakes-Made-by-Novice-Forex-Traders&id=615846