7Days-Forex

Before placing trades, traders must sufficiently analyze the position they are about to take. However, many do not
thoroughly plan out their actions, and instead make trades based on guesses and hunches. This psychological viewpoint can result in traders losing a lot of money very fast. How can this be avoided? Through careful planning and analyses, including where to place stop and limit orders, a trader can keep losses to a minimum while allowing profits to run.

Make sure to have a plan that uses takeprofit and stoploss levels to minimize loss.

A big psychological error traders make is becoming too committed to a trade and unwilling to let it go. A trader must keep his original analysis in mind when seeing the result of a trade, and be objective about what is happening to his position and what he sh should do about it. However, many traders attempt to analyze the position differently from the original analysis so that the analysis will favor their original position. They intentionally distort t their analysis for one of two reasons: they do not want to close the position with a loss or they are h hoping that the position will become
oping more profitable than it already is.

Another mistake made by many traders is overtrading, meaning that they trade much larger amounts of their account
than is reasonable or trade too frequently. Although leverage al allows traders to trade one lot of currency with only $1,000 as a margin deposit, it does not mean that traders should trade their entire available margin in one or two trades. The mistake they are making is that they are thinking of their trade as a $1,000 investment, when in actuality it is a $100,000 investment. Although most traders perform adequate analysis of currencies before placing trades, they sometimes use too much of their margin and are later forced to exit the position at the wrong ti time. A general rule that traders try to follow in order to keep them selves from getting over-leveraged is never using more than 20% of
their account at any given time.

When trading:

• You have to accept a certain amount of risk when you open a position.
• You will always need to have stop orders to protect yourself. Sometimes your stops may be hit but this is the nature of the market.
• With a stop loss order you can cut your losses fast when the market moves against you.
• When placing your stops take into consideration the volatility of the currency and the time frame.

---

Add this page to your favorite Social Bookmarking websites