Dennis Hall - Dennis is a part-time private forex trader who is based in the US. 

He has built up a vast knowledge of currency trading through reading and testing out strategies in live trading environments using very small sums. 

This enabled him to develop his own specific trading style that minimizes risk and maximizes gains.
Dennis Hall
Dennis is a part-time private forex trader who is based in the US. He has built up a vast knowledge of currency trading through reading and testing out strategies in live trading environments using very small sums. This enabled him to develop his own specific trading style that minimizes risk and maximizes gains.
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4 Reasons Your Forex Trading May Not Be Profitable

Learning how to succeed in forex trading is a difficult task. There are many things that can simply go wrong in the process or that you may not get exactly right in your own interpretation. Problems with technical analysis in your trading system can contribute to a lack of meaningful gains. Additionally, there is always the human factor. We are prone to making errors and screwing up in spectacular ways. Let's take a look at some of important mechanics that often derail progress. The following article assumes you are knowledgeable and at least experienced with forex basics.

1) Incorrectly Reading Candlestick Charts

Japanese candlesticks provide a lot of information in a limited package. Chart interpretation is arguably one of the most important factors for success in a lot of strategies but even experienced traders can get it wrong. The reason is how popular candlestick charts are. Not all traders use them, but so many do that several of the signals become self-fulfilling in nature. A pin-bar on a key support level is a high probability signal because so many other participants see it as a high probability signal to trade. Keep the following in mind when using candlesticks…

The best signals jump right out at you.
You shouldn't have to think too hard about the set up. Your other signal criteria should neatly align with the candlestick signal. Those are the trades to take. You shouldn't have to convince yourself that a signal is there.

Candlesticks are only valid signals if they have closed.
Break Outs are popular because they often have a lot of predictable momentum. Do not enter until the candlestick has closed cleanly through the level if you want to avoid False Break Outs.

A candlestick signal is not valid unless it appears in a specific place (depending on the signal).
If a beautiful looking pin-bar appears in a bunch of noise; then it's not a beautiful pin-bar. It's just another noisy candlestick. You do not want to fall into the habit of trading weak or bad signals.

An Ill-Defined Trading Plan With Strategy Holes.
Quite a few traders struggling to find success in their trading are often handicapping themselves by not having a sound Trading Plan. The person may make it through whatever educational material they have been learning from but still fail to draw up and follow a Trading Plan. Treat forex trading like a business. A business has a Business Plan that is their blueprint to success. Less experienced traders often draw up a plan that is very superficial or doesn't provide much structure. A quality Trading Plan has some common factors...

Eliminate all intangibles with concrete points.
Are you trading Break Outs? How do you define a Break Out? What is each point of your entry criteria? How will you exit trades specifically? Every intangible you eliminate is one less point you are needing to think about while in Live conditions.

Define success and when it's time to go back to a Demo account.
There are several traders who do not really know when they are successful. Sure, a lot of people equate it to profitability- but if you've only made $5 in the past month then you're probably having some problems. Set reasonable goals and what to do if you don't reach them.

Set educational goals for yourself.
Forex is a discipline where there is always something to learn. Make that a part of your Trading Plan so you are continuing your own growth as a trader. You'll be surprised at how often you wind up picking out an important sentence of wisdom from a video or book.

 

2) An Ill-Defined Trading Plan With Strategy Holes

Quite a few traders struggling to find success in their trading are often handicapping themselves by not having a sound Trading Plan. The person may make it through whatever educational material they have been learning from but still fail to draw up and follow a Trading Plan. Treat forex trading like a business. A business has a Business Plan that is their blueprint to success. Less experienced traders often draw up a plan that is very superficial or doesn't provide much structure. A quality Trading Plan has some common factors...

Eliminate all intangibles with concrete points.
Are you trading Break Outs? How do you define a Break Out? What is each point of your entry criteria? How will you exit trades specifically? Every intangible you eliminate is one less point you are needing to think about while in Live conditions.  

Define success and when it's time to go back to a Demo account.
There are several traders who do not really know when they are successful. Sure, a lot of people equate it to profitability- but if you've only made $5 in the past month then you're probably having some problems. Set reasonable goals and what to do if you don't reach them.

Set educational goals for yourself.
Forex is a discipline where there is always something to learn. Make that a part of your Trading Plan so you are continuing your own growth as a trader. You'll be surprised at how often you wind up picking out an important sentence of wisdom from a video or book.

 

3) Changing Strategies Too Often

The initial learning process of forex is fraught with technicalities of its own. The trader that is trying to step out into a Demo account and build profit is often confronted with the problem of strategy. Strategies are unique in that many people may practice the same strategies but always wind up with different results. Why? Each trader is an individual. Despite the universal nature of strategies, we all interpret charts differently. That's why it's important not to change strategies often. In fact...

Really examine and look at strategies that are suitable to the time frame you want to trade.
Pick one that resonates best with what you think will make you a profitable, successful forex trader. Work hard to master and understand it through your Demo account.

Do not change strategies more than once every six months while you're looking.
Do all your research up front so you know what you are interested in trying and then go with it. Research the various parts of the strategy and how they interact to create a profitable experience for a trader. You have to give yourself time to actually learn how the strategy works and its nuances.

Not everything that you learn will be relevant to your trading strategy.
A good forex trader is one that is constantly learning. They have a wide array of knowledge to draw from. You must be careful not to try and cram in every single thing you learn into your own approach. Periodically you will hit a point of truth that fits perfectly. Other times it's just not relevant to you and your strategy specifically.

4) Not Taking News Events Into Appropriate Account

Every trader has run into a situation where the perfect set up has appeared, we set our trade and Stop Loss, then it promptly reverses and runs the other direction. It should be noted that each and every trade is just a potential for a profitable trade. There is always that random factor that could send a position into the toilet lurking in the shadows. However, there is usually a reason for it. Many of those reasons are tied to knee-jerk reactions to news announcements that somehow involve the financial sector.

Traders may be interested in news announcements for different reasons. Scalpers may want to use the volatility to trade; long-term traders may want to just be knowledgeable of what is upcoming. Whatever your reasoning be sure to...

Find an economic calendar that provides a volatility indicator for various important events.
It needs to be a part of your analytical material if you do not want to be wind up stopped out on long-term trades. News events are rarely predictable so it is better to stay out of a long-term trade and see how the market reacts before entering. Scalpers may want to take advantage of high volatility events.

Major news events that may not be related to the financial sector can cause drastic shifts in prices.
Natural disasters, leadership changes, or revelations that come out of the blue can send speculators into damage control mode which results in a drastic shift. Always be sure to use a Stop Loss to minimize potential loss and don't be afraid to protect your own position if need be.

Not all events labeled on economic calendars are represented properly.
The primary event to look out for is speeches by top financial names or world leaders. Even a thin veiled suggestion of a change in a particular policy or outlook and can send price running. These events are typically labeled as low volatility but they should be treated as "High".

I hope this article becomes of some use to you. If you have any more suggestions to add to this post, please feel free to leave them in the comments section below.

This post was written by Dennis Heil, a private forex trader from Ventura CA. You can read more articles from Dennis over on his MahiFX author page.

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