Most forex traders enter the foreign exchange South Africa market knowing full well that losses are more frequent in the earlier stages than profits. However, with enough practise it is possible for the forex trader to complete negate this aspect of the foreign exchange market.
Effectively, after practising, these traders find that they can beat the inherent risks of the foreign exchange market and come out on the winning side. This builds confidence. Unfortunately, winning too much also has its dangers in the forex market if the forex trader is not careful.
Avoiding these dangers is possible if the forex trader is aware of the dangers of the foreign exchange market as well as his own state of mind. Consider the following.
Increasing Lot Sizes
The typical reaction of a trader who has succeeded a lot in the initial stages of the foreign exchange South Africa market is to increase the size of the lots that he trades in. While scaling up is a part of growing in forex trading, it needs to be done carefully.
Scaling up too fast too soon can result in profits quickly disappearing and losses rearing their ugly heads. Assessing risks properly is the answer to the dilemma of whether to scale up or not.
Increasing the Number of Trades
The logic that most traders in the foreign exchange South Africa market follow in such situations is that if trades are yielding profits then more trades will yield more profits. However, this is not exactly true.
In forex trading, only proper opportunities would yield profits. These opportunities, unfortunately, cannot be forced. A trader has to wait for the opportune moment to open positions in the foreign exchange or he will risk incurring some massive losses.
Playing with Established Stop Loss Placements
Another method that new forex traders use to increase the chances of their profits is to play with their stop loss placements. The rationale they use to justify this is that since they have more money they can absorb more losses.
This is just another way of taking on more risks and sometimes the trades can go woefully wrong. When this happens, the modified stop loss placements make it even more difficult for the forex trader to stop the losses.
Changing Trading Times
When it comes to the foreign exchange market, there are certain time periods which are more beneficial than others. These are time periods where the volume of trades and the value of the market is at the maximum.
What this means is that when there is more liquidity in the market, the opportunities and profits increase proportionally. Therefore, when a successful but novice forex trader changes the times when he trades on the foreign exchange South Africa market he risks losing out on many opportunities.
It is always better to follow the forex trading strategy that the forex trader spent a lot of time devising because these strategies are based on clear and effective logic.