One of the most common mistakes novice Forex traders make is that they don’t take time to develop and establish a trading strategy prior to entering the trade. When you trade without strategies, it becomes more dependent on emotion rather than disciplined and systematic methodology. It becomes more of gambling than well thought-out investments. Without a trading strategy, your chances of winning become less likely. As a matter of fact, all successful Forex traders trade with trading strategies.
One of the key pillars of good Forex money management is the ability of the trader to calculate his risks regarding each trade he transacts. There are several types of managing risks, one being the use of stop loss orders. There are several types of stop losses and the trader should recognize when and when not to use them regardless of the type of technical analysis indicator used or fundamental analysis strategy employed and regardless of the traders trading philosophy.
The Forex Market is Risky! It is unlike anything else in the financial world because of its speed, volatility, and enormous size. Currency markets are highly speculative and volatile in nature. Any currency can become very expensive or very cheap in relation to other currencies in a matter of days, hours, or sometimes, in minutes. This unpredictable nature of the currency market is what attracts so many investors to trade. However, you have to first ask yourself how much you can afford to lose before you start trading.