Please don’t over trade. Over trading can wipe out your account big time. I’m not saying that just because that is what the professional traders say, but because it happened to me in demo and real accounts. And those experiences lead me to write this article on how to avoid depleting your trading account.
I had signed up for the Avalon FX Pro demo contest the summer of 2009, which started, with a demo account balance of $100,000. First price was a Mac Book. I wanted that Mac Book but more I wanted to see how I would perform trading with $100,000 (I don’t even trade close to that amount right now). Well, I was doing pretty well in the beginning. In fact I was able to turn $100,000 to $211,000 in two and a half weeks. My strategy was sound – trading trend line and horizontal support and resistance and taking advantage of momentum. I did some trades around news time as well (not recommended) which helped. I had profit goals as well that once hit I stopped trading for the day.
But problems set in when I became greedy. Because I did so well, I began to over trade. I started to set unreasonable goals like reaching $300,000 in one week. I traded during low volatile illiquid times thinking I can take advantage of even small movements because I wanted to reach that goal quickly. I traded huge lot sizes. And, I was no longer using stops. Then losses set in. In my attempt to recoup from losses more losses set in. I’ve doubled up; I tried to hedge, but only to gain more losses. I kept trading. In the same day that the account reached $211,000 it dropped to $60,000. I’ve ended the contest with $23,000 left in the account.
Thank God it was a demo!
The best forex trading strategy or advice to beginners in foreign currency trading, is to just execute one winning trade a day. If your money management allows you to earn or lose 1% per trade, then 20 days trading in the FX market would already make the currency trader a handsome 20% profits per month!
