Friday, March 22, 2013

In the middle of the 1990′s, retail investors started to trade currencies on the forex market thanks to the presence of online forex brokers. During the last 15 years, many brokers have started to pop up, the market has become increasingly competitive and forex trading spreads have gone down.

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.




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