Dollar Cost Averaging
Leave a CommentOne thing I see Forex traders do is over trade their account. They may put on a few lots to start with, then they will put a few more lots on hoping that the market will come back for them. They do not even use a stop loss to protect their capital, they just put on more trades to cost average their first bad trade. (Cost averaging is adding more trades so when the price comes back in your favor you will cover your loss faster). The next thing they know they are looking at a margin call and do not have enough money in their account to cover all the trades they have put on going in the wrong direction.
Many times traders will get a hot tip or take the advice from some so called expert while not using their own indicators and judgment on placing a trade. At this point they have a financial and an emotional stake in the trade. They start to lose their perspective on the trade so any good judgment is long gone. The thing that needs to be learned here is to trade with a stop loss, trade with proper amounts of money, and never add onto a losing trade.
Topics: Entry Signals, Exit Signals
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