After reading numerous of these threads I realize why most traders DO NOT make money in forex. It's because of the following reasons:
1. Traders open a mini/micro account with $500 and then play volatile currencies with $1 lots. Now this is a sure way to blow account after account. Besides you will NOT make money trading a mini/micro account. The odds are against you. That is the reason why brokers allow you to open a mini/micro account. They know sooner or later you will get your leverage and/or stop losses wrong.
2. Most traders DO NOT know when to take profits. They look for 50-100 pip profits instead of 5-10 pip profits. The market gives you plenty of 5-10 pips profits every day, but only a few 50-100 pip profits a month. And the longer you stay in the market the bigger the chance of the market turning against you and hitting your trailing stop loss and/or stop loss. I read a thread (25-50 ema) where the originator of the system recommend that you put a 200 pip stop loss. Now that is plain silly. Profitable traders realize that playing $10 lots and only looking for 5-10 pip profits are a safer way to make money. If you can get a 5-10 pip profit every day then you can almost double your account in a year. And i still dont see the sense in entering 2 lots ($20) and then taking 1 lot ($10) profit at say 10 pips ($10x10pips=$100) and then close the rest of the trade after another 20 pips ($10x20pips=$200) or letting it run till it gets stopped put either by trailing stop or stop loss. Do you realize that when you close your trade bit by bit your profit is actually getting smaller and smaller. You made only $300 while getting 30 pips profit. When you closed your whole trade after only 20 pips you would have gotten $400 (20 pips x $20Lot=$400).
3. New traders all look for a "trading system" comprised of Indicators. Indicators are lagging and will NOT make you money in a ranging market which happens to be 70% of the time. So many systems are based on the 4hr chart. Do you know how many pips the market can move in 4 hours? By the time you get into a trade the big dogs are ready to take profit. That only leaves you with a small gain and sometimes even a loss.
4. Most traders don't know what is the driving force behind a currency. If you don't know what is driving the Aud, and Jpy, and Cad then rather not trade those currencies because you will end up getting burned as soon as the driving force changes course. (Aud get driven by goldprices. Jpy currently driven by carry trade. Cad driven by oilprices)
5. But the biggest mistake any trader can make it to take advice from an amateur trader. Amateur traders teach amateur traders to trade like amateur traders.
1. Traders open a mini/micro account with $500 and then play volatile currencies with $1 lots. Now this is a sure way to blow account after account. Besides you will NOT make money trading a mini/micro account. The odds are against you. That is the reason why brokers allow you to open a mini/micro account. They know sooner or later you will get your leverage and/or stop losses wrong.
2. Most traders DO NOT know when to take profits. They look for 50-100 pip profits instead of 5-10 pip profits. The market gives you plenty of 5-10 pips profits every day, but only a few 50-100 pip profits a month. And the longer you stay in the market the bigger the chance of the market turning against you and hitting your trailing stop loss and/or stop loss. I read a thread (25-50 ema) where the originator of the system recommend that you put a 200 pip stop loss. Now that is plain silly. Profitable traders realize that playing $10 lots and only looking for 5-10 pip profits are a safer way to make money. If you can get a 5-10 pip profit every day then you can almost double your account in a year. And i still dont see the sense in entering 2 lots ($20) and then taking 1 lot ($10) profit at say 10 pips ($10x10pips=$100) and then close the rest of the trade after another 20 pips ($10x20pips=$200) or letting it run till it gets stopped put either by trailing stop or stop loss. Do you realize that when you close your trade bit by bit your profit is actually getting smaller and smaller. You made only $300 while getting 30 pips profit. When you closed your whole trade after only 20 pips you would have gotten $400 (20 pips x $20Lot=$400).
3. New traders all look for a "trading system" comprised of Indicators. Indicators are lagging and will NOT make you money in a ranging market which happens to be 70% of the time. So many systems are based on the 4hr chart. Do you know how many pips the market can move in 4 hours? By the time you get into a trade the big dogs are ready to take profit. That only leaves you with a small gain and sometimes even a loss.
4. Most traders don't know what is the driving force behind a currency. If you don't know what is driving the Aud, and Jpy, and Cad then rather not trade those currencies because you will end up getting burned as soon as the driving force changes course. (Aud get driven by goldprices. Jpy currently driven by carry trade. Cad driven by oilprices)
5. But the biggest mistake any trader can make it to take advice from an amateur trader. Amateur traders teach amateur traders to trade like amateur traders.
I know from experience.... I traded way more carefully and much better overall
