As a trader it is important to know when, where, and what to trade. More importantly however is knowing when not to trade.
There is no point learning everything that I am teaching you if you then go and trade at the wrong time, place or currency. All of the currency pairs behave slightly differently, some move 150+ pips in a day, others less than 30. Some kick into a trend and then are very predictable, others have wild swings for no apparent reason.
Let’s look at some different scenarios of when it’s perhaps not such a good idea to trade.
3 Personal Reasons You Shouldn’t Trade Forex
- Do not trade whilst under the influence of alcohol! – Just because you are working from home, not in charge of any machinery or driving doesn’t mean that you can sit in your computer chair all day completely drunk or with a hangover! Trading will become your livelihood, it will provide you an income – you need a clear head. There are many ways to make simple mistakes in your Forex trading plan, mistakes that will cost you money.
- Don’t be caught out by distractions – You need to be concentrating on your Forex charts, you need to get your Forex orders on and make sure you do it accurately. There is nothing worse than missing your entry point and then having to sit all day watching the profits you would have made.
- Don’t let your outside of trading emotions affect your trading – Just had an argument with your partner? Don’t trade. Had a death in the family? Take some time off. Trading will require you to make clear and effective decisions, decisions that will not be clouded by emotions. Trading is emotional enough – you need to do all you can to become a robot!
You need to treat trading like a business. If you wake up and feel unwell, unwell enough for you to normally not go to work – then don’t trade. Just because you are sat at home doesn’t mean that you aren’t working – if anything you need to be more clear headed when you are trading compared to working – because when you are trading you are directly responsible for your wages!
Your emotions and environment can have a massive negative effect on your trading, seriously hampering your results (profits). The general rule of thumb to follow is – “If I wouldn’t have normally gone to work, then do not trade”.
4 Market Reasons You Shouldn’t Trade Forex
- Bank holidays – Not just bank holidays in your home country, but you must be aware of bank holidays of the major currencies around the world. If either the UK or USA have a bank holiday then there is little point trading at all, remember that those banks are the biggest participants in the forex markets. Without their added volume the market movements will be small and sometimes erratic and not following normal patterns. If it is a bank holiday in a country other than US and UK, such as Japan or Australia then I recommend that you just not trade their currency pairs, and stick to unrelated currencies, such as GBP / CHF or GBP / USD etc.
- News announcements – News is scheduled and each news announcement has a different affect on the Forex markets. Whilst you are learning to trade it is advised that you do not enter a trade within 30 minutes before or 30 minutes after a news announcement. You must be aware of the news announcements, not so important of the contents of the announcement, but most definitely the time. Once you are settled into your trading, I can teach you good news trading strategies to make the most of the increased movement, but it is a little more advanced than standard trading. News announcements and their market effect are the single biggest killers of trading accounts.
- Speeches by prominent people – These are normally included on economic calendars and can therefore be prepared for. The leaders of the European Central Bank, Federal Reserve and the Bank of England can quite literally send markets into a frenzy at the drop of a word. Hints on economic policy changes that are coming up, interest rate changes and general market sentiment analysis from them will all make large movements in currency markets.
- Weekends – In general, it is unadvisable to hold trades over the weekend. Banks going bust, political announcements, terrorist attacks or natural disasters can all wipe out your trades very quickly. These types of events may lead to the market opening on Sunday night (GMT) with a large gap – and a very large difference in your trading account!
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