Automatic Forex trading systems are often trumpeted as the way for beginner and veteran traders alike to eliminate emotional decision making and mental issues from their trading. The reality is that there are still many emotional and psychological traps that can hinder any trader’s Forex automatic trading operation, even with the best Forex trading systems.
There are 3 deadly Forex mistakes that can prevent the successful operation Forex automatic trading and Forex robot traders, and by the end of this article you will be able to identify these deadly mistakes and eliminate them from your Forex automatic trading.
So where do most automatic Forex trading systems fail? Believe it or not, most Forex robot traders actually lose money because of the person running the Forex robot trader, and not the person who developed it. This failure stems from mistakes made by the operator of the automatic Forex trading system while affected by the following psychological factors:
Deadly Mistake #1: Greed
The first deadly mistake that prevents most Forex system traders from realizing the full potential of their automatic Forex trading system is greed. Many Forex robot traders allow the trader to adjust the money management rules of the system in relation to the account balance and the level of leverage available.
Greed causes many traders to make the mistake of trading lot sizes that are too big for their level of leverage, which often results in a rapid wipe out of the trading account. When determining trading lot sizes for your Forex robot trader, be sure to err on the side of safety so as not to fall into this trap of greed.
Deadly Mistake #2: Impatience
The second deadly mistake that prevents most Forex system traders from realizing the full potential of Forex automatic trading is impatience. Once they have bought their Forex robot trader, they just can’t wait to load it up with real funds and begin their Forex automatic trading right away.
This goes against the cardinal trading rule of always prioritizing capital protection. Every automatic Forex trading system must be tested on a demo account first to verify the results advertised by the developer, as well as to familiarize the user with the correct application of the Forex robot trader.
Deadly mistake #3: Fear
The third deadly mistake that prevents most Forex system traders from realizing the full potential of their automatic Forex trading system is fear. This is closely tied with mistake #2 and the lack of live demo testing before commencing Forex automatic trading. Without the experience of trading the Forex robot trader on the demo account, the trader will not know what to expect from Forex automatic trading and will be prone to prematurely shutting down the Forex robot trader and returning it for a refund.
To avoid lost profits on a perfectly functional Forex robot trader, every trader must trade it on a demo account for at least 30 days to determine the basic parameters of the system (e.g. average profit/loss, standard deviation & upper/lower range limits).
Are you making any one of the 3 deadly mistakes: greed, impatience and fear? If you are, stop trading immediately and take the necessary steps to correct these mistakes before you go any further. Otherwise, you are putting your trading account balance in grave danger of a blow out.