The greatest enemy for most traders is not other traders, brokers or the even the market, but themselves. Give yourself every chance of success by following these simple guidelines.

Invest with a Plan

Many traders seem to take shopping more seriously than trading. The average shopper would not spend 100,000 yen without serious research and examination of the product he or she is about to purchase, yet the average trader would make a trade that could easily cost him or her 100,000 based on little more than a “feeling”. Be sure that you have a plan in place before you start to trade. The plan must include stop and take profit levels for the trade, as your strategy should take into account the expected downside as well as the expected upside.

Let Profits Run and Cut Losses Early

This simple concept is one of the most difficult to implement and is the cause of most traders failure. Most traders fail to follow their plan and take their profits before reaching their profit target because they feel uncomfortable sitting on a profitable position. These same people will easily sit on losing positions, allowing the market to move against them for hundreds of points in hopes that the market will come back. Stops are there to be hit, and to stop you from losing more then a predetermined amount! The mistaken belief is that every trade has to be profitable. By simply allowing your profits on the winners to run and making sure that your losses are minimal, you can get just 50% of your trades right and be doing well.

Don't Fall in Love With Your Trades

The logic behind having a plan and sticking to it is because most objective analysis is done before the trade is executed. Once a trader is in a position he/she tends to analyze the market differently, emotionally in the “hope” that the market will move in a favorable direction rather than objectively looking at the changing factors that may have turned against your original analysis. This is especially true of losses. Traders with a losing position tend to ‘married to’ their position, which causes them to disregard the fact that all signs point toward continued losses.

Don't Use all Your Margin

Do not over trade. One of the most common mistakes that traders make is leveraging their account too high by trading much larger sizes than their account should prudently trade. Leverage is a double-edged sword. Just because one lot (100,000 USD) of currency only requires $1000 as a minimum margin deposit, it does not mean that a trader with $5000 in their account should be trading 5 lots. One lot is $100,000 and should be treated as a $100,000 investment and not the $1000 put up as margin. Most traders analyze the charts correctly and place sensible trades, yet they tend to over leverage themselves. As a consequence of this, they are often forced to exit a position (stopped out) at the wrong time.

IMPORTANT NOTICE: Forex trading involves high risk with the potential for substantial losses, with or without the use of these guidelines. FXFor Japan provides these simply as a service to our customers. . These guidelines are intended to assist traders in making their own trading decisions and do not provide specific trade recommendations. FXFor Japan does not represent or warrant that traders will be successful by following these guidelines.

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