Improve Your Forex Trading Skills

Trust Through Transparency

The Common Mistakes to Avoid

Guide summaryAnalyst’s Advice

Education checklist

The Common Mistakes to AvoidWe all make mistakes sometimes.

It is human nature. But the smart

trader is one who learns from those

mistakes to constantly improve

their trading strategies.

In Forex trading even professionals sometimes sell when really they

wanted to buy - or accidentally “fat finger” a trade. But you don’t have

to learn all of the common mistakes the hard way. In this eBook we’ll

help you not to fall into any traps by outlining the mistakes that

you can easily pre-empt and avoid. Because if you can learn from the

mistakes of others without any cost to yourself, that can only

be a good thing, right?

The mistakes discussed

in this eBook are

common mistakes,

with the emphasis on

the word “common”.

By making yourself

aware and avoiding

these mistakes, you will

significantly improve

your chances of Forex

trading success.

Mistake No.1 Failing to Understand the Platform

As the proverb goes, “a fool and his money are soon parted”, and the Forex markets certainly don’t pity fools. By failing to understand the functionalities of the platform, you leave yourself at risk of being underprepared and therefore increase the risk of making mistakes.

There are few worse scenarios than finding yourself mid-trade and realising you have no control over the situation because you didn’t take the time to understand the platform.

Rest assured: this fear and panic is significantly enhanced when the position is moving quickly against you. You would not drive a car without knowing where the steering wheel was, so why trade forex without knowing how to use the platform?

To avoid this scenario, make sure you spend time becoming competent with the platform and you feel comfortable manoeuvring around your trades. Like learning to drive a car, you begin by concentrating on checking your mirrors and getting accustomed to using the clutch to change gears. Eventually this becomes second nature and your focus can shift to driving safely on the road.

Let Hantec Markets be your instructor

You can never be too careful

With access to a wide range of educational tools, from user guides to in-depth tutorial videos

and even a personal platform walkthrough from your dedicated account manager, we ensure you are completely comfortable with Metatrader4 before you begin trading.

Make sure you prepare for extreme situations. Imagine if you had a local power cut whilst in the

middle of a trading session. How would you exit a trade? Do you know how exposed you are?

Our top tip: To be safe, always keep the Hantec Markets contact number and your account manager’s details to hand (preferably not on your computer, just in case).

Think of it like this: The platform is your

vehicle, and the markets as your highway. Your first job is to make sure you know

how to get out of first gear!

Mistake No.2 Using the Wrong Order Type

Accidentally placing a Stop-loss Order too close to the market, or entering

a market order when you simply wanted to place a Pending Order are all

avoidable annoyances.

Losing trades are never easy to accept, but nothing is more infuriating than

losing trades because of a lack of the basic understanding of order types.

Order type DescriptionMarket Order A trade executed at the current market price.

Pending OrderA request for a trade to be opened at a certain level above or below the current market price, depending on the expected direction of the market. If the market price reaches this level and triggers the trade, it will become a market order and will be filled at the next best available price.

Stop-loss OrderA modification to an existing open order defining a stop-loss level at which you would like to close out the trade and realise your losses: • For buy/long positions, this order to sell/close will be below the prevailing market price. • For sell/short positions, this order to buy/close will be above the current market price.

Take-profit Order

A modification to an existing order defining a take-profit level at which you would like to lock-in your profits: • For buy/long positions this order to sell/close will be above the prevailing market price. • For sell/short positions, this order to buy/close will be below the current market price.

At the very least, you should be completely comfortable

with the orders laid out in the table below:

Mistake No.3 Poor Trade Management

The methodical, patient and

precise persona that worked

you into a trade can very quickly

abandon you at the first sign of

profit as greed takes over.

But if you always go for the quick

profit you will restrict your

positions from achieving their

full potential - limiting

your ability to maximise those

profits in the longer term.

On the flip side, that same

persona may have landed

you in a losing position. At

this point, fear and hope are

your potential enemies. You are

facing the fear that if you close

the position now you will lock in

a loss, and you are hoping that

at some point in the future the

position will turn itself around.

Failing to keep these emotions

in check is a cardinal sin of

trading, as they can all blur your

judgement and prevent you from

making sound trading decisions

A wise trader once said: “Let your profits run and cut your losses”. By this they meant that if you have a profitable trade, you should allow it to reach its full potential rather than ducking out too early and settling for a small profit. Secondly, don’t keep losing positions open. You should look to exit them as quickly as possible to limit the potential loss.

It’s important to remember that the exit point of a trade matters just as much - if not more so - than the entry point, for the simple reason that it determines your profit or loss on the position. With many traders taking the time to appropriately select, plan and execute a trade in line with their strategy, it is surprising how quickly they can fall into the trap of wasting all that effort by failing to implement an exit strategy.

Keep Your Emotions in Check

Use Stop-Losses to Help Manage Risk

Forex Definition: Drawdown

Drawdown is a measure of the difference between a peak or high in your trading account to the next low point. It is used to monitor how risky an investment is.

Depending on your individual appetite for

risk, you might be willing to risk more on

each position.

• For a low risk trader, a general rule of

thumb would be potentially limiting the

loss on one trade (drawdown) to 2% or

3% of total equity.

• For a higher risk trader, the loss per trade

may be as high as 10% of total equity.

Where you fit within this spectrum is up to

you (although your Hantec account manager

will be happy to talk it through and help you

decide) and making this decision will play

an important part in your trading strategy.

It’s extremely important that you feel

comfortable with your total risk per trade.

Whilst accepting a loss within your accepted

drawdown can be a bitter pill to swallow, it

is in fact a necessary evil that will allow you

to fight another day rather than wiping you

out completely.

Introducing a stop-loss is one of the most

fundamental aspects of effective trade

management. A Stop-Loss Order is set at

a predetermined level which corresponds

with your risk limit for that trade. Should

the price move against you and trigger the

Pending Order, it will become a Market

Order to close. This will help to remove the

human element to the trade, but also help

you to quantify losses and bring discipline

to your trading.

Extending your stop-loss when the price approaches can be a recipe for disaster.

By doing so, you undermine the very purpose of placing a stop-loss in the first place.

NOT RECOMMENDED:Extending Stop-Losses

Our tip: Whilst your percentage of winning trades certainly won’t be anything to brag about, by managing your trades more effectively, you should see that on average your winning trades considerably outweigh your losing trades in size. By instilling this discipline into your trading, you have a much better chance at being profitable overall.

ALwAYS REMEMBER:

Keep your eye on the prize.

Mistake No.4 Letting Emotion Dictate Your Decisions

As already mentioned briefly,

emotions can become very intrusive when you’re trying to become a profitable trader. The overriding feeling of joy, greed

and self-gratification that come with a winning trade and the anger, depression and fear that come

with a losing trade can be extremely damaging

to your trading strategy.

One misconception is

that to be a successful Forex trader you need to profit from every trade.

Accepting that you have made a bad trade isn’t easy. You may find it difficult to

close out of a losing position if you fall into the trap of convincing yourself that a corrective move

is coming and you can still make a profit. Once you’re wearing those hypothetical

blinkers, there is a risk that you will subconsciously block all evidence,

clouding your rational decision making

capabilities.

Failure to effectively manage

any psychological distress attached to a losing trade can

escalate as resentment drives your desire to recoup losses or to ‘get even’

with the market. Never let a bad day get worse. Over-trading as a result

is likely to leave you even worse off

(see Mistake No. 5).

Alternatively, winning trades can

also create emotions that can affect your

trading. It’s undeniable that winning a trade feels good. It will build your confidence, but it can also lead to a

feeling of arrogance and invincibility. This could cause you to become complacent with your trading.

If this leads to you taking on excessive

risk, ultimately mistakes could

be costly.

To help you avoid this, create a

well-structured strategy, incorporating a balanced

risk/reward outcome. More importantly, STICK TO IT! Operating

within self-constructed rules will bring consistency to your trading

and reduce the uncertainty that is inherent

in emotional trading.

Mistake No.5 Overtrading

with Hantec Markets there is no conflict of interest

Hantec Markets does not run a B-book or make money when clients are losing. Our business model is volume based and our sole income is derived from the spread. Contrary to what you might think, this does not mean that we want our clients to do crazy amounts of trades if this blows their accounts up.

We believe in building long standing relationships and we want our clients to be successful. Why? Because this will bring us greater volume in the long term. We believe that a long term client is a successful and happy client – and that benefits everyone!

While overtrading is usually a

consequence of emotional trading,

it is also the temptation to trade

too frequently or attempting to

manage too many positions at once.

When you have several open

positions, it usually implies one of two things. Either you have the time to

analyse and develop a strategy for

multiple currency pairs, or you have

a reluctance to close losing trades.

The former can sometimes be

the case – but it’s unlikely. The latter is far more likely

and is strategically problematic.

Trades should be approached and judged on pre-

defined parameters which identify only viable opportunities in the market. It is also key to avoid

trading just because you have the margin

available, as this will leave you over-exposed to market

volatility.

Sometimes sitting on the fence is the best option.

Always having an open position is another sign of overtrading.

This assumes your strategy always

presents a trading opportunity. It’s

probably safe to say that this

shouldn’t be the case.

Mistake No.6 Overleveraging

Overleveraging refers to holding a position that is too large in relation to the available margin in your account. Similarly, underfunding equates to the same problem, because you won’t have enough account collateral to support larger positions.

When you have used your entire available margin, you are fully

leveraged. This means that even the smallest adverse price

movement can be enough to trigger a margin call. This will lead

to your account being liquidated. And that’s not good!

Using the pip value of the currency pair you are trading, you can then calculate how many pips it would take before you hit your risk per trade (i.e. your stop-loss level). This is often referred to as the ‘2% rule’ due to the fact many traders choose to risk 2% per trade.

An obvious proverb springs to mind when thinking about overleveraging or underfunding: “don’t put all your eggs in one basket”. This couldn’t

be more appropriate. Ensuring the diligent use of a suitable

position sizing strategy will help you to effectively manage the risk

associated with leverage and protect you from the day-to-day volatility

we see in the Forex markets.

To avoid this, when formulating your strategy you must calculate what the appropriate size of each trade is, bearing in mind your financial targets and risk/reward ratio. A traditional method used by traders is known as Fixed Fractional Position Sizing. The idea behind this concept is that you only risk a certain percentage of your overall balance on each trade:

Account equity

Chosen risk %

= Risk per trade

The use of leverage is actually one of the benefits of Forex trading as it allows a trader to hold positions without parting with their full-face value. At Hantec we offer leverage of up to 400:1, thereby offering the potential to deposit only 0.25% of the contract size to open a position.

You might wonder what the problem is? Well, leverage is a double-edged sword. The impact of price movements in your account will reflect

those of the full position. If the trade is moving with you, then great. But if it is

moving against you then your account, which represents a

tiny portion of the face-value, will be bearing the full brunt

of the full position.

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Mistake No.7 Using an Unsuitable Strategy

What is my profit target per trade?

How much am I willing to risk on each trade?

How often will I trade?

Which timeframes should I be looking at?

What is my end goal and

how do I achieve it?

These are some of the fundamental questions you need to ask yourself when developing a strategy:

With any investment, in order to be successful you need to develop a

rational set of expectations and define your anticipated goals. This will

help you to implement a strategy that helps you achieve these goals.

A common error amongst traders is failing to use a suitable strategy or,

indeed, to use any strategy at all. Whilst spontaneity may be exciting

in other aspects of your life, when it comes to trading, planning and

research are key.

Another simple mistake is to assume that the more complicated the

system, the better it must be. Some traders try to employ a system that

takes into account an almost uncountable number of variables, ranging

from complex technical indicators to mathematical algorithms. This

may work for a limited few traders, but in general the simpler you can

keep your strategy, the less room you leave for error.

Remember, traders’ strategies are individual to the trader’s goals and personal trading style. with varying degrees of participation and a multitude of differing expectations, no two strategies will be alike.

Mistake No.8 Failing to Understand the Risks Associated with Forex Trading

Increasing accessibility to the Forex markets, along with the benefits of leverage and the sheer scope of liquidity, has made Forex trading exponentially more popular. However, the market is extremely dynamic and requires a certain degree of commitment.

Traders who are not prepared to monitor their open positions on a regular basis may find that this is not a suitable investment. Additionally, it should be noted that contrary to the popular misconception, Forex is not a ‘get rich quick’ solution. Just as with any financial investment, the risks associated with Forex trading should not be ignored. It’s important to understand these risks before trading on a live account.

Finally, you should only trade with risk capital - i.e. money you can afford to lose. Make sure you carefully weigh up your financial situation before deciding to enter into the Forex market

Make sure you read our full risk warning and risk warning at the end of this eBook. This information is also available via our website at www.hantecfx.com/content/risk-disclosure

Summary

Trading forex is a skill - and you won’t just develop that skill

overnight. To avoid making the most common mistakes you

must be willing to educate yourself, research the mechanics

of the market and understand the tools required to trade

proficiently.

The good news is, if you are willing to commit this time then

you will be able to take advantage of the many benefits

associated with trading Forex.

Analyst’s AdviceHere are a few pieces of advice from Hantec Markets’ own Market Analyst to give you the best possible chance of becoming a successful Forex trader.

I. Never let a bad day get worse:

Understand and accept that you will not always be successful. Try and embed this into your trading mentality as soon as you can. If you are having a bad day, don’t let things get out of hand and end up writing off the whole account.

3. Don’t fight the market:You must learn to work with the market. If things are going against you, accept it and move on.

4. Don’t dwell in the past:Whilst hindsight is a wonderful thing, rueing missed opportunities, or doubting past decisions is not constructive. Learn from your mistakes and focus on the future.

5. Listen and learn from others:

Try to learn the easy way, not the hard way. Take heed of advice and learn from the mistakes of others in order to avoid making them yourself. Whilst this sounds obvious, giving in to the overwhelming urge to do your own will is more than likely be detrimental to your account balance.

2. Focus on the risks: Whilst it’s easy to daydream about how you are going to spend your trading rewards, this is not going to help you become a good trader. Be conscious of the associated risk and remember that risk management is of paramount importance.

Guide summaryBy understanding and absorbing

the knowledge in this guide you can

build a stable foundation from which

to pursue your end goal of becoming

a successful trader. However, this

is merely the initial building block.

Don’t be naïve and think that you will

achieve your goal overnight.

At the same time, don’t be

disheartened. At Hantec, we are here

to provide help and support every

step of the way. Take advantage

of our daily morning reports

and videos, our weekly strategy

piece and an extensive range of

educational materials - ranging

from user guides to videos. These,

combined with our committed and

experienced customer support will

support you in taking your first steps

in the world of Forex trading.

Education checklist

Read our extensive beginners guide to trading Forex.

Educate yourself

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� •��Study�the�MT4�user�guide�to�understand how to use the full functionality of the platform and customise the setup so that it caters for your requirements.

� •��Watch�our�library�of�technical�videos�to ensure that you are constantly expanding your understanding.

Sign up for our Market

Research� •��Read�our�daily�Morning�Reports.

� •���Watch�our�daily�Morning�Report�Videos.

� •��Read�our�Weekly�Outlooks�research�pieces.

� •��Stay�up-to-date�on�what�numbers�to look out for with our daily and weekly Economic Calendar.

Familiarise yourself with our

Autochartist offering� •��You�will�receive�a�free�subscription�

to a market leading intraday pattern recognition and trade signal tool that offers you all the trading opportunities you could imagine.

Learn from your account manager

� •��For�that�personal�experience,�we�assign our demo and live account holders a dedicated customer service representative who will act as your account manager, helping with any queries you have throughout the learning process and beyond.

� •��Ask�questions�when�you�are�unsure.�It’s important that you fully understand how everything works. After all, that’s what we’re here for.

Open a live account� •��Once�you�feel�you�are�ready,�open�

a live account and put all of that research and practice to good use.

� •��You�can�even�run�a�demo�account�alongside your live account if you feel that you need that extra safety net, especially if you aren’t too sure about a strategy.

Risk warning:

Trading in Foreign Exchange (FX), Bullion and Contracts for Differences (CFDs) is not be suitable for all investors due to the high risk nature of these products. Forex, Bullion and CFDs are leveraged products that can result in losses greater than your initial deposit. The value of an FX, Bullion or CFD position may be affected by a variety of factors, including but not limited to, price volatility, market volume, foreign exchange rates and liquidity. You may lose your entire initial stake and you may be required to make additional payments. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions. Before deciding to enter into FX, Bullion and/or CFD trading, you should carefully consider your investment objectives, level of experience, and risk appetite. You should only invest in FX, Bullion and/or CFD trading with funds you are prepared to lose entirely. Therefore, only your excess funds should be placed at risk and anyone who does not have such excess funds should completely refrain from engaging in FX and/or CFD trading. Do not rely on past performance figures. If you are in any doubt, please seek further independent advice.

Hantec Markets is a trading name of Hantec Markets Limited who is authorised & regulated by the Financial Conduct Authority (FCA) in the UK - FRN 502635

Trust Through Transparency

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