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 Most Common Flaws in Forex Trading

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PostSubject: Most Common Flaws in Forex Trading   Mon May 07, 2012 9:42 am

The signals generated by technical indicators are correct, as they only show signals that are related to sell, buy or hold. Though this system is theoretically good, in reality it is very difficult to make a decision based on their signals. In fact these signals confuse the traders, making them to enter the market too late or too early. Sometimes they make them inactive, not being able to make any decision at all to enter the market. This dilemma is due to the flawed trading system that does not function properly. Instead of guiding traders to make a profit, they complicate the trading process much more than it actually is and confuse the traders to make bad decisions that end up in losses.

The next flaw is in the personality or the attitude of the trader. When a trader has a nonchalant attitude or when he is lethargic without the drive or passion for the trade or success it becomes a major flaw that affects trading. Usually people of this nature are drawn to Forex market believing it as a get rich quick method. They regard trading as a game of gambling and do not realize the need for skill, investment, management and the amount of research and study required to succeed. For them it is a hobby where a loss is of no concern. This nature is very dangerous and leads to wrong decisions and costly mistakes.
Forex selling profits

A major flaw commonly found in Forex trading is emotional in nature. The emotions that come into play here are fear and greed. Though a profitable trade makes one to jump with joy and excitement, it also paves the way for greed to enter into the equation, upsetting the balance by disrupting the factors that influence the risk management. Once a trader rides the waves of profit, he starts to ignore many aspects of trading to continue his ride which leads to his downfall. They wait too long to close a deal, which might be a costly mistake. At this point fear rears its head and adds to the problem making the trader to compound his mistakes. While trading, one should be objective at all times and not believe in intuition or their emotions to make a transaction.
Forex trading

Another flaw in Forex trading is too little knowledge of the trader. Though some people are genuinely interested in making profits, they enter the market without proper training or gaining enough knowledge of the trade. Or they are unable to apply whatever theoretical knowledge they have to make practical decisions. This is another major flaw that prevents traders from making a success of the Forex trading.

The most common flaws in Forex trading occur due to the presence of multi indicators because of the principle of confluence. The ingenuity and sophistication that is presented by multi indicators are the main reason for their popularity among many Forex traders. Most of the confluence system indicators just display the price fluctuations and does not make any positive difference to the trade. Because of this many traders end up with either a over bought or over sold technical indicators such as the momentum indicators, stochastic, candle stick chart pattern recognition and some indicators that are supposed to be a sophisticated artificial intelligent systems.

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