Given the high degree of risk associated with the active use of leverage during afternoon trading , there are a number of tactics , frequent use of which could cost the trader of his savings. There are five types of errors are usually allowed traders in the race for profit and instead lead to its decline .
Having some knowledge , having a necessary discipline and implementing other approaches , these potentially dangerous mistakes can be avoided.
1) Build long positions on dips
Typically , traders are often faced with a similar situation . In fact, they did not originally intend to act this way, but in most cases it ends up that way. With the build-up of long positions in a falling market, a number of related problems. First, holding a losing position , the trader not only potentially lose money , but also time. Naturally, these time and money can be used to better advantage by opening more favorable position.
Besides , in case of loss of capital will need much more effort to win back their losses . If a trader loses 50% of capital, from the remainder of the need to achieve a 100% gain to get back to the starting point .
Large losses as a result of a transaction or a day can greatly hinder further growth of capital. While on the one hand, in some cases, this tactic may be working , as a rule , it leads either to a significant loss , or to the margin -call , because the trend may be more time-consuming , and the trader will not be able to stay “afloat” especially gradually increasing positions .
As a rule, are particularly prone to these problems merchants that cater for daily fluctuations . Work at short time intervals requires timely working out good features and fast closing losing trades .
2) Opening positions on the eve of publication
Typically, traders understand the publications and events can affect the quotation currency pairs , but to predict the direction in which there will be changes difficult.
A trader can be almost 100 % sure of what will be one or the other news , for example, the Fed will raise interest rates or not, but still not be able to predict how the market will react to it . Typically , in addition to the main publications are additional data or leading indicators , which can lead to extremely illogical currency fluctuations .
Moreover , it is important to take into account this simple fact , as a surge in volatility following the publication itself , which can lead to the breakdown of the stops on both sides of the market.
As a result of currency make sawtooth jumps , and only after some time, the underlying trend is set (although this may not happen ) .
Accordingly, the open positions on the eve of the publications can be quite dangerous. Easy money is not here, but he who does not believe it can face serious problems .
3) Opening positions after publication
As a rule, the market reacts to news outlet jump aggression. On the one hand , it may seem that join the market and quickly earn a few points will be easy. However, if you do it haphazardly , without a proven trading plan , the consequences can not be less awful than in the case of open positions on the eve of publication.
News outlet often leads to a ramp movements of currencies, which is explained by the lack of liquidity or the appearance of ” pins .” Even if a deal was in the black, then the situation can change quickly in the opposite direction , there is activity in the market rate shocks in both directions.
Usually in these cases the foot dependent on the level of liquidity , which can miss , and it means that the potential loss may be greater than anticipated.
Thus, after the publication of traders must wait recession volatility and development clear trend . This will reduce concerns about liquidity , better cope with risk and stabilize the orientation of currency fluctuations.
4) risk more than 1 % of the capital
Excessive risk-taking does not promise a similar profit. Most traders are going on a big risk when making individual transactions , sooner or later will go negative.
In the market environment is not accepted to take the risk (the difference between the points of entry and stop-loss ) greater than 1% of the capital in the commission of individual transactions . Professional traders often much lower risk of 1% of capital shares .
Here, special attention should be paid to the day trader . Do not forget about the daily maximum risk , it may be 1 % (or less) of the amount of capital or may be equivalent to average daily profit of the last 30 days .
For example, if on account of the trader is 50,000 dollars (not taking into account the leverage ), its maximum loss should not exceed $ 500 per day .
You can use another option counting – if past 30 days , the average daily earnings reached $ 100 , then the loss should not exceed this amount.
This ensures that no single day and no deal can not afford to hurt the trader.
5) Unrealistic expectations
Typically, the reasons for the emergence of unrealistic expectations is a lot , but often contribute to their emergence above error trader. Market participants often hope that the market situation will develop in such a way that they would like . However, the market does not care about your hopes .
Traders need to understand that the development of the market situation can be a very illogical. The market can simultaneously go ” ripped ” trades , high peaks observed volatility and develop some trend. Isolate these phases from one another and , on this basis , make deals , you can not . Trying to prove otherwise could lead forming erroneous judgments and frustration .
The best way to avoid unrealistic expectations will formulate a trading plan and stick with it clearly . If it brings consistent results , do not change anything – having access to leverage , even a small chance can turn a big success . Take what the market gives you . With the growth of capital can adjust the size of the position , boosting profits.
As for new strategies, then test and implement them better since the smaller deals . If results are positive , you can increase the volume .
In addition, during the afternoon of trading is necessary to consider other factors. Do not forget that the closer to the opening session, the level of volatility in the market tend to be higher . Several strategies can demonstrate good results in the opening of markets , but not work during the day. With the development of the session the market situation stabilizes often that requires a different approach to the trader keeping positions.
Toward the end of the trading activity levels may increase again , which means another change of strategy.
Thus, do not forget about all of the above and create high expectations .
conclusion
Typically, traders often fall into the trap , making five major mistakes which must be avoided by all means , developing alternative strategies .
Rather than build a long position in a falling market is worth close open positions and exit from the market , according to previously prepared strategy. As for the news , here it is necessary to wait until the market situation is not completely subside . Also, do not forget about the degree of risk : loss in any case shall not exceed the usual profit. And finally , do not generate high expectations, but rather to accept what is happening in the market as a given.
Given all of these recommendations , traders can greatly improve your chances of success .