Currency Day Trading and Mistakes

by Michael O Norton Forex Trader

Currency day trading is 90% mental! You have heard this from many professional traders but when you start as a novice in the Forex world you can fail to realize the significance of that statement.

Of course, it is necessary to develop analysis skills using a variety of technical indicators. Risk management and understanding of the market is also crucial if anyone is to succeed at currency day trading.

But the greatest challenge of all is developing mental discipline and emotional control. After many months of practicing in a demo account and testing the water cautiously with a few hundred dollars in a mini account, you can study your main trading faults.

Here are the biggest mistakes discussed by Yee Kok Siong a forex trader. Perhaps you can learn from them too!

1) ANXIETY & DESPERATION - LEARN TO RELAX!

Feeling a compulsion to trade - its poison!

If good opportunities were missed the day before, or if one or two days have been quiet with no trades, then you need to carefully monitor your emotional and mental state.

If feelings of desperation begin to rise take a step back and enforce strict mental discipline - keep to your strategy, only look for safe trades, wait for the right setup!

2) IMPATIENCE - LEARN TO WAIT!

How many times do we enter trades prematurely? Wait until the setup really sets up!

Don't be afraid of losing an initial big run because:

Its not worth the risk
There will always be another opportunity
Catch the next retrace when it is much safer

3) LOSING CONCENTRATION AFTER A LOSS - KEEP FOCUSED

There is a danger after a losing trade to either:

Shut the mind down so you become closed to further opportunities that day
Act in desperation by impetuously entering an ill-thought out trade soon after to try and regain losses
After a losing trade muster up all your mental resources and detach yourself from it. Imagine standing on a chair and shouting at the top of your voice: "NEXT!"

4) THE MENTAL RUT - BE READY TO SWITCH DIRECTION

If price goes opposite to what your initial analysis told you, look at charts with new eyes following the direction of price.

It can help to maximize a chart on your screen and look at it from across the other side of the room. Get your mind out of the one direction rut and look at the chart afresh looking for new opportunities in the new direction.

5) FAILING TO TAKE REASONABLE PROFITS

How many times you have been looking at a profit of 20 to 25 pips on the screen only to see it evaporate before you eyes because you were hoping for a big move and decided to hold on.

Currency day trading by nature revolves around smaller price movements. Often price will get to 20 or 25 pips and then retrace. It may then resume its direction or it may not.

It is important to take the first profit early, and then let an additional lot or position(s) run to a more ambitious profit target. At the same time as taking out the first early profit, the stop is moved to protect the remaining positions.

Save yourself a lot of mental exhaustion by taking a reasonable profit early after examining the charts to see where the first major level of support or resistance is likely to be.

Identify and Act

You know currency day trading is more an art than a science. Each individual interprets the charts according to their own perception. There are no rigid, hard and fast rules. Having said that, a solid currency day trading strategy is necessary obvious.

However, it must be backed by strict mental discipline and control over emotions. See if you identify with any of the mistakes listed above and take the appropriate action!