When something good turns bad

Forex trading can be a complicated business. More often than not we know what bad things can disrupt our trading. Greed, distraction, poor money management skills. We tend to think that if we can only eliminate these problems then forex success would be easy.
However, there is another problem, one that comes from having ‘too much of a good thing’.

These 5 events are undoubtedly positive, but they can often lead to the opposite.

Making too much money early on

The best thing that can happen when trading is to make money and to make too much is even better. But if you make too much money too early, while you are only just getting started it can lead to overconfidence. That overconfidence can lead to complacency, and in turn that can lead to ruin.

Hitting a lucky run

For exactly the same reason, being lucky in the market can be a big problem too. Striking lucky in the market feels great at the time but all too often it leads to greater risk-taking. You start to feel invincible and that you are a natural and that means you start seeing ‘bad luck’ all of a sudden.

Finding an unexpected entry (without an exit)

Forex trading is about scouring the price charts looking for profitable patterns and setups. Sometimes you come upon a setup that you weren’t expecting, in a timeframe or market that you don’t normally trade. The setup is too good to pass up so you make the trade. However, by doing so you forget about important criteria such as your money management rules, your trading plan and your exit.

Trading in a bubble

We’ve seen it happen so many times in the stock market but it happens in forex too. Traders getting on the right side of a bubble and riding it to the top. Problem is, those who are in the bubble often don’t know when to get out. They often end up staying in the bubble while it pops and then trying to get back in all the time the bubble collapses.

When you move your stop and make a profit

Usually, it’s not wise to move your stop after your trade has been placed. Your trading plan should dictate where to place your stop according to your money management rules. Sometimes, if you move your stop, you end up making money, a lot of money. And if you had left it where it was you would have lost. The difficulty with this approach is that it’s down to luck and the reward that comes from making the mistake just reinforces bad behaviour.