Info For Forex Trader: Avoid These Common Trading Mistakes

Forex is extremely popular now. Well, it has been popular before. But 15 years ago it was a market that not everybody could access. With the development of the Internet Forex became very accessible. No wonder. You do not need to have any licenses or diplomas. No office, no education. All you need to have is a PC and the Internet. Sure, you are to have some money to start your forex career. Fortunately, some brokers offer very affordable packages from $20.

In early 2000s forex was invaded by amateur traders. Some of them managed to become professional traders who earn money in forex on an everyday basis. Others come to forex just to have fun and gamble.

As a rule amateur traders make too many mistakes. Some of their mistakes are fatal and cannot be corrected. According to stats, about 90% of traders lose in forex. It happens because of different reasons. Some of them have no knowledge while others are psychologically unprepared for serious trading. Here are some major mistakes that most amateur traders tend to make:

1. Thinking like a stock trader and liquidating a short position with a sell order. Since most stock traders enter the market with a buy order, they naturally liquidate the position with a sell order. But futures traders are equally comfortable trading from the short side, and that means liquidating a short position with a buy order. (Back in the days before screen, trading, when clients had to call orders directly to the brokerage firm, it was not uncommon to have a client call and say: “Buy me short” or “Sell my shorts.” Pity the confused clerk or broker who had to interpret that kind of misplaced order.)

2. Forgetting about good-till-canceled orders. More frequently than you’d believe, clients wind up with a trade they never wanted because they completely forget about a good-till-canceled order they entered months back. This can be especially dangerous when one is approaching the delivery month, when many contracts remove the daily limits and intraday price swings get larger than usual. That good-till-canceled soybean order that was $1,50 away from the market can get filled before you know it, and suddenly you have a position you never knew you had.

3. Confusing eurodollars with eurocurrency. Eurodollar Time Deposit futures is a 90-day interest rate contract. Its nickname is “euro.” The EuroFX is a currency contract based on the currency of the European Monetary Union. Its nickname is “euro” too. Broadly speaking, eurodollar futures is more of an institutional market. That’s why I always get suspicious when retail clients tell me they want to go long or short eurodollars. More times than not, they mean EuroFX currency futures.

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