Six Illusions That Ruin Trading Accounts

WikiFX Strategy (15 Jan.) - Trading is a mental game to a large degree, in which illusions will ruin traders confidence.

1. Illusion of windfall profits

In the hope of using a sprat to catch a mackerel, many traders apply leverage to their investment. Such a practice, however, could trigger huge losses once the market moves against them. Its better to look at returns on a risk-adjusted basis.

2. Illusion of Holy Grail

While some traders hope to speculate on the market by some kind of analysis or event, such as a certain pattern or indicator, the fact is market trends are unpredictable. The Holy Grail simply does not exist in trading.

3. Illusion of professional help

Some novice traders are eager to consult experts about trading opportunities or ways to get their money back. Unfortunately, most available “experts” just try to con them out of money. Traders should make careful judgement.

4. Illusion of EA

An Expert Advisor (EA), commonly known as an intelligent trading system, could automatically execute trading strategies. But personal trading experience will be more reliable as there is no 100% accurate strategy.

5. Illusion of “market participation”

Many novices regard the market as full of opportunities, but only with strategies best suited for the market can they distinguish opportunities from traps.

6. Illusion of manual stop

Some newbies, who have been aware of placing stop-loss orders, find it difficult to calculate and set the security position. It will be too late for them to set a stop loss in the face of market swings.

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