04.26.11

Why to avoid Early Entries

Even the most experienced Forex traders are sometimes faced with the mistake of entering the trading market at an early level. But this is rather a common mistake made by beginners. This happens due to the fact that the trader does not have the patience to let the market reach the good entry level. And this has a real negative effect not only on the trade in itself, causing losses to the trader, but also on a psychological level, getting the trader to continue to act under the initial mistake and causing him or her even more losses.

Not having the patience to wait for the market to arrive at a specific level at which you would like to enter and making the mistake to enter early has some drastic consequences. An early entry means entering the trading market 30, 40 or 50 points ahead of where you would have really wanted to enter. Acting as such will cause you to be at the dispense of your account at the end of the day, as the market generally evolves the way you were expecting it to evolve and this will cause you to suffer the consequences of entering early. If you enter early, the risk you will have to face will be a lot wider due to the fact that your stop losses marker will be at a different level than the one you would have liked it to be, so you will be forced to sell sooner, having thus losses. Entering the market early causes so much psychological pressure based on the fact that the risk level grows exponentially, that you will not only sell at a bad value, but you will also be frightful with your trades to come. This is maybe the most important negative aspect of entering the trading market early, the fact that such a bad trade can make you loose your confidence.

On the other hand, if you have the patience to wait for the market to reach the level you expect it to reach, this means that you will be able to enter at the level you wanted to and that you will be confronted with a risk level you are prepared for and you can handle. Moreover, you stop losses marker will be placed at the level you would have wanted it to be places, guaranteeing you a comfortable feeling when trading. The worst scenario you can be confronted with while waiting for the market to reach the level at which you would really want to enter is that of seeing that the market doesn’t really get there. This will have a positive psychological effect because, even though you miscalculated the time frame, you have seen the direction where the market is headed right and that will have a positive effect upon you.

So, early entries are to be avoided with any costs because the only effects they can have upon a trader are negative ones, causing him or her not only to loose money when trading, but also having a real negative impact at the psychological level, causing the trader to show a much higher degree of cautiousness at the next trade, which can also lead to losses.

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