The forex
industry has developed many exceptional trading tools such as chart analysis
software and even trading signal services with automatic execution.
Nevertheless, many traders lose money for several reasons: bad risk management
(money management), a lack of training in trading, the use of excessive
leverage, etc.
But perhaps
the biggest challenge that a trader faces is the fact that market’s are not
always trending and they are not always ranging. Lots of traders have winning
strategies, however, these strategies are sometimes being used at the wrong
time! A majority of traders are trend traders (“the trend is your friend” ever
hear that one?), but most of the time they shouldn’t be trading as the market
only trends about 30% of the time! Unfortunately, lots of traders have trouble
waiting on the sidelines for a trend to develop. When the market is stuck in a
range and consolidating, you are more likely to hit a stop loss than a take
profit.
The opposite
is true of range traders as well. Once the market takes a definite direction,
they have trouble waiting for the next consolidation area.
Knowing when
not to trade is just as important as knowing when to jump in. And looking
elsewhere for other opportunities is key as well. Many traders only trade the
EUR/USD as this is the most liquid pair, but there are other major pairs as
well. Following this logic, it also makes sense to look for opportunities in
other time ranges. If you trade the 15-min chart, try looking at the 1-hour or
4-hour chart, you might see other opportunities there (of course, jumping to
higher time frames means staying in a trade for a longer period of time, but
with proper money management this should not be a problem.
BY JOHN CARRICABURU
Source : http://blog.hotforex.com
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