By James Woolley

Lots of people become very wealthy trading the forex markets, but sadly most people who give forex trading a try will end up losing money. There are many reasons for this but I think there are four specific reasons why so many people never become successful.

The first reason is because lots of traders fail to create a trading system that trades with the trend. This is understandable to a degree because it’’s natural for people to want to open a long position at the bottom of a trend and go short at the top of the trend. However the problem is that you can never be sure that the top or bottom of the trend has yet been reached.

For example in a lot of cases you may find that the price is massively overbought and the upward trend seems to be over, but when you go to open a short position, the price will continue trending upwards. This is why it’’s always better to trade with the trend because that way you will always be opening high probability positions.

Another reason why many traders fail to make money is because they trade a lot of short-term positions with the aim of capturing say 5-10 points per trade. The problem with this method is that in the long run the spreads will really eat into your profits and you may even find that you face restrictions from your broker because many of them don”t like people opening lots of short-term positions.

Another common problem is that many traders take too many risks. This is hardly surprising with most brokers offering high amounts of leverage but you should try and risk no more than 2-3% of your capital per trade. That way you can still live to fight another day even if you suffer a few consecutive losses.

Finally another reason why so many people lose money trading forex is because they place too much faith in automated expert advisors. These robots are now commonplace but unfortunately most of them fail to deliver consistent profits in the long run.

Sure they may generate some profits in the short-term, particularly as a lot of them have modest price targets, but the trouble is that a lot of them will employ very large stop losses which will obviously result in big losses if they are actually triggered.

So overall if you are serious about becoming a successful forex trader, I suggest you try and avoid these four common mistakes.

About The Author

Click on the following link for free forex tips and strategies, including the exact 4 hour trading strategy that James Woolley uses himself to trade the markets:

http://theforexarticles.com

This entry was posted on Monday, September 21st, 2009 at 9:43 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.