Learning about the common mistakes made in foreign currency trading will help you to improve your skills and chances of being successful. Here are some common mistakes and assumptions new traders make:

- Misplacing Stops
Stops are necessary to avoid bad losses, however poorly placed stops can be just as bad. Before placing a trade the trader should consider the risk to reward ratio for the trade. The stop needs to be set with the traders money management in mind and should not be too close or too far away from the price. Traders should also consider moving their stop as the trade goes in their favor to lock in profits and reduce potential losses.

- Abusing Leverage
With Forex brokers offering up to 400:1 leverage, it’s easy for inexperienced traders to get carried away with the hope of making quick profits. When traders use a high level of leverage the returns can be astounding, but when the trade doesn’t work out the result can be catastrophic. Traders should always calculate the dollar value of the risk they are taking for each trade and ensure that this is appropriate for their account balance. Experienced traders rarely risk more than 2-3% of their account balance on any one trade.
Read the rest of this entry »

It can be very tempting to take your credit card out of your wallet in order to take advantage of a great opportunity for a trade in your top Forex trading system. However, prior to taking that credit card out, reflect that without sensible money management you could end up broke faster than you realize.

No form of investment is guaranteed to make money and Forex is not an exception. As a matter of fact due to the amount of leverage available to traders and investors in the Forex market, greed can easily take over and all commonsense is thrown out the window. Experienced investors and Forex traders realize that some of their trades, even up to half of their trades, will lose money. The reason why they are successful is that they have a good money management plan so when they do lose, it doesn’t wipe out their portfolio.
Read the rest of this entry »

A common question from new investors interested in trading forex is: What is Forex Made Easy? This post will attempt to give a basic answer to this question.

Forex Made Easy is a book written by James Dicks, the full title of the book is Forex Made Easy : 6 Ways to Trade the Dollar and was published in 2004. The book contains a lot of useful information for beginner traders, including basic information on setting up a workstation for trading, technical analysis, advanced indicators, Fibonacci sequences, Elliot Wave, money management and how to place trades. Read the rest of this entry »