This reason goes hand in hand with reason number 2. Many times new trades come into The Forex Market without a sensible plan. when you couple having unreasonable expectations with the fact the most new traders do not have a good plan you have a recipe for disaster. Some new traders will latch onto an Introducing Broker and try to make themselves feel better about their trading even though they do not really understand what the Introducing Broker is saying or doing.
Some traders also look for a Forex signal service. Unfortunately in the Forex Market the moves are lightning fast and the latency of many signals renders them obsolete. If you are going to use an email or sms Forex signal service you should make sure that it is for long term trends rather than a short term scalping system. Even a few seconds latency could cost you the profitability on the move.
As we will discuss later in the series not having a good plan can cost you in a number of avenues including leverage, money management and your entry and exit points. before you get started with your trading it is important that you look at why you were successful in your Forex Practice Account. Did you get lucky? if the move had gone against you could you have blown out the account? how consistent was your trading? it is crucial that you are honest with yourself when you formulate your plan. do you have all day to sit in front of the screen? will your system translate well to an automated system? these are all factors that go into beginning the process of forming a plan.
HINT: One Key point to focus on when forming a plan are your entry and exit points. If you don’t have all day to sit in front of the screen a good idea might be to use Limit orders which will give you an opportunity to enter the market at a predetermined price when the market reaches that level. By using this tool you set your entry and exit point on the same order and determine the overall risk on the transaction before even entering the market.