Hindrances to successful forex trading (I)

Before every forex trade, successful or unsuccessful, there are several hindrances to overcome. Every trader will face these hindrances in varying degrees along their trading odyssey. It is important to identify these hindrances because that is the only way you can do something about it. You can not improve on anything until you know precisely what you are doing wrong. It is also vital for these hindrances to be identified early in the trading journey before there is a loss of interest due to trading failure or due to pressure from friends and peers. I know someone who came into this business, scrapped up a few dollars to fund a trading account and was expecting a Lexus Jeep in a few days. I tried my best to let him see he was not ready yet, but to no avail. Not surprisingly, he wiped out the account in just a few days. He ran away faster than his legs could carry him- not even trying to learn what he was doing wrong. If he had been able to discover the problem, he would have moved ahead. On the other end of the spectrum are “extremist” traders who keep losing accounts and just cannot seem to locate where they are going wrong, yet, they do not let up and are still pumping in funds to trade simply because          ” they love trading”.

It just may be that they are simply addicted. For such people, my advice is this, step back, stop trading, go and do something else that works for you before you end up becoming a wreck. You simply may not be cut out for forex trading now. May be something that should be in place is not yet in place, and who knows when it will fall in place. Keep an eye on the business, that missing component may become obvious to you one day. In between these two extremes are the teachable ones that I call the “die hard”, getting better after every trade, profitable or unprofitable, getting better after every new account wiped out or withdrawn in profit. You have to examine yourself and see whether your trading habits are evolving into better ones or not. If you are not getting better, if you are still making the same mistakes over and over again, then you belong to the “extremist”  camp.

            Having said that, we need to look at some of these trading hindrances in detail, the degree by which these hindrances will affect a trader depends on the type of trader. There are news traders, day traders, swing traders and position traders. News traders live on the edge, trading only on specific news releases for very short amount of time, typically with significant risk.

Day traders watch their systems daily waiting for opportunities to show up typically closing trades before the day ends. Swing traders wait for trade signals, either by sms or email, then they enter their trades which typically lasts a couple of days or weeks. Position traders may only trade once in several months. It is obvious that hindrances for one type of trader may not be hindrances. They may be classified material and immaterial hindrances.

As I mention  some of them, you should be able to identify which type of trader would be most affected by each one. For material hindrances, one major hindrance is internet connectivity.  Though forex trading is also conducted over the phone, it is so much easier, less costly and strenuous using the internet. Some brokers do not even have phone support. Where your internet connection is very slow, frequently disconnects or experiences significant loss, certain types of trading would only lead to disaster. I once tried to spike trade (spike trading is buying or selling into the immediate 1-2 second jump in prices after a news release, where you are closed out of the trade in  a few seconds only) the forex market. I purchased what I thought was one of the fastest available internet connections.

The news trading software called Secret News Weapon would not even work with it because it gave an error that news trading signals were not getting to my computer in less than 200 milliseconds.

This was true because I measured it myself and it was hovering between 350 to 500 milliseconds, which is a disaster for spike trading. It was obvious I could not spike trade from my location.   

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