'10 Mistakes to Avoid and Learn From in Trading Forex'"10 Mistakes to Avoid and Learn From in...

[Type text]

"10 Mistakes to Avoid

and Learn From in

Trading Forex" An E-book by Mark So, Founder Forex Club Asia

“10 Mistakes to Avoid and Learn From in Trading Forex” By: Mark So, Founder Forex Club Asia

To Get this E-book, Just Join us at http://www.forexclubasia.com/join-us-for-free/ Risk Warning: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you.

Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss

of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with forex trading, and seek

advice from an independent financial advisor if you have any doubts.

Become

a

Starter Member of Forex Club Asia

for FREE

Go to:

http://www.forexclubasia.com/join-us-for-free/

Risk Warning: Trading foreign exchange on margin carries a high level of risk, and may not be suitable

for all investors. The high degree of leverage can work against you as well as for you. Before deciding to

invest in foreign exchange you should carefully consider your investment objectives, level of experience

and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial

investment and therefore you should not invest money that you cannot afford to lose. You should be

aware of all the risks associated with forex trading, and seek advice from an independent financial

advisor if you have any doubts.







Are You Making These Mistakes When

Trading the Forex Market?

After more than a decade of trading the forex market, we at Forex Club Asia have come to

understand and live by specific realities of this unyielding and often cruel market. Anyone who

trades this market long enough will inevitably sustain battle scars which can sometimes just be a

small survivable nick, but oftentimes, without the right guidance can be downright fatal.

So for the starter members and newbie traders reading this, we hope that you read and digest

what we at Forex Club Asia want to teach you to avoid. This is for your benefit. And for the

traders that have been around a little longer and are still at it despite the pain, we hope that this

mini e-book will remind you if not point out to you what Not to do when you trade the Forex

market moving forward.

.

"10 Mistakes to Avoid and Learn From in Trading Forex"

An E-book by Mark So, Founder Forex Club Asia

Mistake # 1. Trading with fearful money

Let's start at the very beginning. You deposit your funds into your account, but you are not

willing to trade it until you are 100% certain that the trade you make will make money. You are

already making mistake #1. You are trading with fearful money. Now there is nothing wrong

with not wanting to lose money, of course, who would want to willingly toss their wealth away,

but if it is more than just the fear of losing, meaning if you cannot afford to lose the money, then

please take our straightforward advice -- don't start trading yet.

Here's a story of one of our members to give a little more depth and perspective on what we

mean by Mistake # 1. A member of ours back in 2008 became convinced that Forex trading was

the way to financial freedom, so he did what he thought was a natural thing to do, he took out a

loan from his credit cards (plural) and placed a huge deposit into his trading account. Still wet

behind the ears, he started trading like there was no more tomorrow and lost it all in just a few

short weeks. He thought that he could quickly pay off the debt with his future earnings, he soon

painfully realized that he could not afford the losses at all. So he had to find additional work and

a total of 3 years to fully pay off this debt. Now, there was nothing wrong with wanting to make






money in forex, but if you go about it by using money you can't afford to lose or what we call

"fearful money" then let this story be a shining example of what consequences may lie ahead for

you.

Okay, here's the game plan then to avoid this mistake. Before you deposit money into your

trading account, ask yourself this simple question "How much can I afford to lose?" Whatever

your answer, that is the only amount you deposit and trade in your account. At Forex Club Asia,

we recommend for the complete beginner to put in only $300 US. If you can afford to lose that,

then good, you are now trading with "Fearless money" and you can now trade more objectively

Mistake # 2. Trading without stops

A "stop-loss" order is one of the most crucial orders there is in trading. It prevents you from

losing more than you should if the trade goes bad.

Let's say you buy something, anything and not necessarily currencies, at the price of 10. If you

can sell that something at the price of 12 then you make a profit of 2. Are you following? Okay,

but what if that something starts to lose value and the price that anyone is willing to buy it now

will only be 5? Then you've lost 50% of your money.

Well, think of stop losses as a means to get out even before the price drops to a level where you

do not want to be. So going back to our example -- You buy something at the price of 10, you set

a stop-loss order to 9, now if that something starts to drop in value to 5, before it even reaches 5,

you will still be able to sell it at 9 with only a small loss of 1 or 10% instead of 5 or 50% Got it?

Now, please read and repeat this line: "An amateur trader thinks about profits, a

professional trader thinks about risks."

Would you like to be a professional in this field? Then never trade without stops because the

Forex market, more than any other market, is a place where volatility, irrationality and downright

ugly can last far longer than you and anybody of that matter can remain solvent. Trading without

a stop loss order is like jumping out of an airplane without a parachute and just hoping that you

land on a soft patch of hay in the middle of a snow storm (and what are the chances of that

happening?)

Here's another story from another member of the club to illustrate how devastating trading

without stops can be. In 2007, a member of ours deposited $9,800 into his trading account.

Within 3 short months, he was able to grow this to a whopping $18,000. So he informs us of his

good fortune and we congratulate him and tell him that a 100% gain in 3 months is superb, time






to withdraw the profits and take the risk off the table. He just looks at us incredulously and asks

why he should do that, he'd rather "compound" the money and double it again. A few days later,

he informs us that he was doing very well. So well in fact that he decided to just trade with his

gut and without stops! He reasoned that because he was trading with a much bigger volume that

placing stops would be counter productive to his objective of doubling his money.We knew at

this point that his ego and greed were making him reckless which we warned him about. But you

see, there is only so much advice we can give especially if it will not be heard. A few more days

goes by and he informs us that his account had dropped to $1,500. Not a pretty story, in fact, it's

downright brutal, unfortunately it is a very common one.

So, remember now when we say, always trade with stops and never trade without them.

Mistake # 3. Moving your stops to a worse position

You are in the trade, you placed your stops, the market moves against you and you are about to

get stopped out. What do you do? Unless you aren't human, you will do what most people do,

move your stops away from the price, so that your trade lasts a little longer and hope that the

trade will eventually go your way. This is what we call the "folly of human hope" and we at

Forex Club Asia are not immune to this temptation, nor will a majority of you reading this right

now. As human beings we were designed to hope for the best when the going gets tough, the

problem is, in the Forex Market, hope is usually punished without mercy if you let it get out of

hand.

Remember that the reason why we have stops in the first place is for it to be "hit" when the

market decides to go against us, 9 out of 10 times, moving your stops to a worse position will

simply aggravate the situation and result in a much higher loss than when you first entered the

trade. Let's go back to the example a while ago when you bought something at the price of 10,

you place your stop at 9 and the price starts to drop to 9.8, then 9.5, then 9.1 you tell yourself, I

bought it at 10, I want to make a profit by selling it at 12 but in about 10 cents, I will sell this at 9

with a loss. Gee, let's remove my stop price from 9 and set it to 5, yeah, that should give me

more time to wait for the price to head back up. So that is what you do and the price goes to 9,

then to 8.8, then accelerates to 6, then goes to 5 and you sell at 5, your "revised" stop level now

results in a 50% loss, 40% more than if you had not moved your stop order at all.

Let us share another story of another member of ours to show the "folly of human hope" by

moving your stops to a worse position. It was year 2003 and our member back then was trading

with a small $300 trading account (he was just a novice back then).






In one profitable night of trading, he was able to add $95 dollars for a total of $395 in his trading

account. Not bad at all. He should have just enjoyed the gains and stopped trading right then and

there but decided to trade again to level off his account balance to $400 or $5 more from $395.

So he places another trade with his stop order in place. Within 5 minutes, the trade was already

producing $10 of profit, he had met his $5 objective and more so, but instead of cashing out, he

decides to stay with it and see how much farther it will go. But in the seconds that follow and

without warning, the market turns around and is now moving down, our member could

remember seeing the profit go down from $10, to $5, to -$5 and still plunging. So without

hesitation, he made mistake #3, he moved his stop order to a worse position. He was only

supposed to lose $20 on that trade, but because of his rookie mistake, the one single trade ended

up losing him -$345. That's right, he ended the night with $50 when it should have been $395. It

was a very tough experience for him which he remembers to this day.

So, if you place a stop (which you must know how to calculate properly by the way), treat it as

set in stone and if you will move it, it should only move in one direction, a better position.

Mistake #4 below expounds on this.

Mistake # 4. Not moving your stops to a better position

Have you ever had a trade that was making money one minute and suddenly turns around and

ends up losing? It's one of the worst feelings in the world, in fact many times, it feels even worse

than just losing money on the trade from the very beginning. Many traders do not do this for

most of them do not know that they can do this. A Stop-loss order can and should be moved to a

better position as often and as soon as you are in profit.

So let's modify our example of stops a bit more. Let's say you buy something at the price of 10,

then you want to sell it at the price of 20, you set your stop to the price of 9. Are you still with

us?

Okay, the market price starts to move your way and that something that you just bought is now

priced at 15. You are 5 price figures away from your goal of 20 what do you do?

Well, you can cash out already if you want, there is no shame in that, but what if you feel that it

will continue to move up to 20, well, one of the things that you should do is to move your stop

order to 10 or even better if you move it to 12. By doing that, if the market price starts to head

down from 15 to 14 to 13 and even lower to say 5, you are assured that you will still get out at 12

with a profit of 2.






As a way to explain this even further, we have a video tutorial available for Trader and Lifetime

Members that explains how we do this at Forex Club Asia. Go to

http://www.forexclubasia.com/always-trail-your-stops/.

Mistake # 5. Adding to a losing trade

Ever heard of "Cost-Average-Investing"? Well it doesn't really work in the Forex Market. Cost-

Average-Investing is when let's say you buy something at the price of 10, then the price drops to

5 and you buy again, so your average price for buying that something is 7.5 (average of 10 and

5).

Which means you were able to buy the price of that something at a lower price which should be

good right? Well, in other markets, probably, in the forex market, it is synonymous to suicide.

Unless you are an advanced trader who understands how to "scale in" trades or “build your

position”, we at Forex Club Asia would warn starter traders to avoid Cost-average-investing in

the forex market like the plague. Reason being the forex market is a pure two-way street where

the price of currencies do not always go one way (up) but can go the other way (down) for

months even years without heading back up.

To illustrate how dangerous a mistake this is, here's another story of another member of ours that

kept adding to a losing trade. The year was 2007. For 2 weeks, there was a huge crisis brewing in

China and the GBP (Great British Pound) was crashing relative to the USD (US Dollar) because

of it. Our member had $30,000 in his account at that time and he had pulled that money from his

401K in the US (Yes we do have US based members as well) to invest in Forex. It was just his

luck that he had bought the Pound at the exact hour the pound started to crash. At first, his

account went down by 10%. He kept his cool and proceeded to "cost-average" his trade by

buying again at a lower price. The price started to plunge further and his account was now down

a whopping 30%. He asked us what he should do to which we replied, cut your losses now and

stop adding to your trade. We later found out that he didn’t listen and instead kept adding to his

losing trade and by the time he realized he shouldn't have, it was already too late. His $30,000

account had dropped to $6,000.

So remember when we say, Never, ever add to a losing trade, cost averaging in forex will do you

more harm than good.






Mistake # 6. Engaging in "Vengeance Trading"

We are all human beings with feelings, and when it comes to trading, the most destructive of

which is anger. When we lose money in the forex market, we can't help but feel wronged. We

will usually blame everyone and everything else before we own up to the consequences of our

actions, especially when a trade goes bad. One natural reflex we have when we lose money is to

try and win it all back in the same breath, and when you do not make the money back and lose

even more, this will cause more frustration and anger, which will inevitably may force a trader to

engage in what we here at Forex Club Asia call "vengeance trading".

Vengeance trading as the name suggests is trading the forex market for vengeance and not for

profit. As a trader, when you become extremely frustrated with loss after loss, you sometimes

lose it and go in to the market with whatever you have left, and sometimes, with everything

you've got. People will do this out of spite, just to prove that you are right and the market is

wrong. And as we very well know and have gone through a few bouts of this destructive

behavior ourselves, only one conclusion will hold true -- If you go after the market with

everything you've got, the market will take everything you've got.

As we have gone through the emotional ups and downs of being a forex trader, having been there

and having done that. So might we add a bit of advice to those willing to listen. A loss of money

no matter how big will only be compounded if it is accompanied by a loss of emotional

control. Controlling yourself emotionally is close to impossible if you are relying on sheer will

power to do the job for you. Emotional control must be done physically by shutting down your

computer for a few days and giving yourself time to re-charge. We assure you, doing so, no

matter how childish and simpleton as it may seem will save you from doing something even

more childish and irresponsible.

Mistake # 7. Not knowing when to rest from trading

Emotional control or emotional capital is more important than monetary capital. In other words,

the more you trade, the less you will be in control of your trades emotionally. Try trading the

market for 24 hours a day 5 days a week and you will see what we mean. A lot of traders believe

that trading more frequently will lead to trading more profitably. Although it may seem to make

sense at the onset, it depends greatly on the trader's capability to still be in control, especially

when the trades are losing and also when the trades are winning. At Forex Club Asia we do not

attempt nor pretend that we can control our emotions during these situations. Instead, we use a

mechanical rule to help us keep our emotional capital in check, we call this “The Rule of 3”.






“The Rule of 3” works this way:

-Lose 3 times in a row, you stop trading by shutting down your gear, get out of the Forex Market

and re-charge. How long will you take a break depends on if you are no longer angry, or

depressed or wanting to exact revenge on the markets.

-Win 3 times in a row, you also stop trading and get out of the Forex Market as well. Let your

adrenaline die down. If you do not do this and keep trading with 3 wins under your belt, your

emotions and greed may get the best of you resulting in reckless, higher risk trades that if it goes

wrong can ruin your day when it should have been a pleasant one to begin with.

If there is one mistake that many, many traders make is that they forget to re-charge and re-

energize themselves and so, take our advice to heart. It is for your benefit and sanity.

Mistake # 8. Not setting a quota for your losses

Let us repeat this line once more: "An amateur trader thinks about profits, a professional

trader thinks about risks." As traders, we often imagine and fantasize how much profits we

can make from the Forex Market, we even have plans on our profit targets and when to cash out,

but little if not at all do we think about setting quota's for how much you can lose. At Forex Club

Asia, we make it a rule to never let our losses reach or exceed 30% on any given month. We

would therefore recommend that you follow us here or modify it to a more suitable percentage or

amount when you trade. Doing so will give you control of your trading. However, we do not

recommend going over 30% for losses as doing so will make it so much harder to recover. If

you were to modify this figure, do so to a smaller number.

Of course setting a quota and actually implementing it are 2 entirely different matters for which

we offer the same solution. Once you hit your loss quota for the month then, physically shut

down your computer, walk away and start again fresh and more emotionally re-charged the next

month.






Mistake # 9. Not Setting a target and Not withdrawing profits often

If and when you start to make gains in the forex market, the normal thought process would be to

keep on trading with the money that you made. If for example you double your money from say

$1,000 to $2,000, you would most likely trade again with the whole $2,000 thinking that you can

increase or even double the money again right? The word you are looking for is "compounding",

and if you are not careful, this mistake can decrease your money a lot faster than making it.

Here is yet another story from 2 of our members to expound on this further. The year was 2008

and two members started with $1,000 each in their accounts. Member A was able to grow his

money to $1,800 in a month. He was so happy with his results that he contacted us and told us

the good news. We said that an 80% return in 30 days is not bad at all and that he should think

about withdrawing the profits. He didn't listen and instead decided to "compound" his earnings.

Exactly 3 days later his account ended up with $150. What he did not realize was that mistakes

in trading can happen, and if he has more volume on the line, the losses would be a lot bigger as

well.

Now, let's talk about Member B. He also started with $1,000 in his account, but unlike Member

A, was more "conservative". He was also able to increase his account to $1,500 in about 3

months. Happy as well with his results, he contacts us and tells us the good news. We said that a

50% return in 90 days is not bad at all and that he should think about withdrawing the profits.

Fortunately, Member B listened to our advice and decided to withdraw $500 from his account. A

year later, his account was still $1,000 but the important and more amazing part was that he had

withdrawn close to $3,000 already. What Member B soon realized after withdrawing his gains

was that doing so kept him "humble" and if he did commit trading mistakes, which inevitably do

happen, that it would not be as big as if he had "compounded" his trades by trading with bigger

money.

Many times, we see our new members still falling into the "compounding trap” and we always

tell them this: "Do not fall in love with trading, instead fall in love with withdrawing

money!"

Now let’s go a step further, as a starter member or a beginner trader we invite you to learn more

about our simple money management plan. Go to: http://www.forexclubasia.com/withdrawal-

planner/ to understand and download our Withdrawal planner now.

http://www.forexclubasia.com/withdrawal-planner/

http://www.forexclubasia.com/withdrawal-planner/






Mistake # 10. Not seeing it through to the very end.

Anything worth doing in life, is rarely easy, even more so with trading the Forex Market.

Have you ever found and picked up a $20 bill lying on the floor? What will you do with it (after

trying to find and giving it back to the owner of course)? You will most probably spend it on

some useless junk, or for a few, might save it for a rainy day but rarely will you truly appreciate

its value completely. No really, think about it.

Why is this so you ask? Because it was easy money to begin with and as the saying goes "easy

come, easy go".

Now, let's say you work double shifts, work overtime, and sacrifice your precious time with your

loved ones and you get $20 for it. What will you do with that $20 now? You will most probably

save it, and you will appreciate every single cent of it and rarely would you just spend it on some

useless item. Why? Because it was hard-earned, and Well-deserved money.

The point is, forex is all about Hard-Earned AND Well-deserved money, for it will require

sacrifices, it will require work, and it will require risks.

The question is, are you in it for the quick buck? that may be here now and gone tomorrow? Or

are you in it for the long haul where if you truly understand this market, you will be able to

eventually get consistent and well deserved money?

So, the last and probably biggest mistake of them all is that traders often quit too soon and end

up leaving the Forex Market with nothing but bad experiences and memories. We have all

experienced this at one point in our forex careers and we know that it can come to a point where

nothing seems to work, and an overwhelming feeling of wanting to quit overtakes you, but we

keep going because we all believe in this one simple truth. Success is always just an inch away,

and we will never fail, for we will never quit.

Thank you for downloading and reading our E-book:

10 Mistakes to Avoid and Learn From in Trading Forex

Become a Starter Member of Forex Club Asia for FREE

Go to:








About Mark So:

Mark is a Forex Trader, Forex Fund Manager, Forex Educator,

Businessman and Investor who started investing in physical

currencies in 1998 and then traded forex online in 2003 when the

internet became more stable and accessible.

Through the years, Mark (with the help of his loving wife Jhoanna) has successfully built the following

businesses which run until this day.

Mark is: The Founder and Chief Forex Trainer of www.forexclubasia.com (Online Forex Education / Live Trading) Established 2011 The Co Founder and Chairman of Businessmaker Academy. (Business, Finance, Corporate Training) Established 2003

The Founder and Chief Forex Trainer of www.monsterpips.com

(Online Forex Education) Established 2007

The Founder and Chief Forex Trainer of www.forexclubmanila.com

(Online Forex Forum) Established 2008

The Founder and Chairman of Buona Vita corp. (Events management corp) Established 2000

The Chief Operating Officer of Kitchen on Wheels. (Food Cart company) Established 1978

The Chief Financial Officer of Teach It Forward, Inc. (Charity organization) Established 2004

http://www.forexclubasia.com/

'10 Mistakes to Avoid and Learn From in Trading Forex'"10 Mistakes to Avoid and Learn From in...

Documents

Transcript of '10 Mistakes to Avoid and Learn From in Trading Forex'"10 Mistakes to Avoid and Learn From in...