Online Forex trading: A newbies Dilemma (Part 3)

At this juncture, let me say that no matter the number of years a trader has been trading Forex and has not overcome these negative factors; such as Greed and fear, Indiscipline, Poor Money/Risk management, impatience, he is still considered as a newbie trader. Lets take a look at some of these factors and how to overcome them.

Greed and fear 

What is greed? 

Greed and fear are common emotions that bedevil a newbie trader. Greed can be defined as an inordinate or insatiable longing especially for wealth. In the context of this article, a greedy newbie trader wants to make 100 percent or more of his capital in one fell swoop or in a short period of time. Greed is a force that makes the trader trade irrationally as though loosing his senses. Greed causes the trader to over-trade. When he has met his profit target, he has the urge to re-enter the market again and again. Even if he is in a bad trade, he would want to 'revenge' the market.

Fear is another emotion that is dangerous to trading Forex. Fear causes a newbie not to take any risk. Even when a newbie trader sees a good trade setup, fear does not allow him to enter the market. And when he is in an open trade, he suddenly cuts his profits short or allows his loses to run.

Poor Money/Risk management 

Many newbies apply poor money/risk management in the trading. some don't even apply these tools. Some take very high risk when placing a trade. That is to say he uses large lot sizes more than is expected of him, with a mindset of doubling his account.I have seen many traders who don't use stop loss. A friend once told me that "its as if there is a force watching him when he trades". According to him. "Whenever i place stop loss, the market hunts  it", he added. This is laughable. Traders like that don't go far in the financial markets. Within a short time, their accounts get wiped out.

No trading plan or strategy

Traders emotions are heightened without a trading plan or strategy. A trader without a plan tend to enter the market when he feels like even if they are no proper trade setups. For instance, there might be periods of very low volume and low volatility. In such conditions of consolidation, boredom sets in and you see a trader itching to enter the market just because he is bored. His timing is bad.

Indiscipline and Impatience

No trader can survived without being disciplined and patient. All these negative factors outlined above occurs when a trader is not disciplined and patient. Lack of indiscipline and impatience can  cause serious health hazards while trading forex and lead to a traders waterloo.

How to overcome these pitfalls

• You should acquire knowledge. Be grounded in Technical and Fundamental analysis.
• The importance of Money/Risk management cannot be over emphasised. Apply good Money/Risk Management when trading.
•  Walk away from  the computer when you are bored
• Be disciplined and be patient when trading. Follow your trading plans and strategy to the letter. Stop changing trading strategy every day/week. Let  your strategy be tried by fire just like gold. Give it some time
• To deal with greed and fear, You have eliminate the factors that created them.

Conclusion

With this i have come to the end of this series which started from Part 1. I have exposed factors that hinders a newbie trader to be successful and have proffered ways of avoiding them. If you like this article please do well to share.