1. Trading against the trend.
You can plot a long-term moving average and a medium-term average. When they are both going in the same direction and the medium-moving average trend has crossed the long-term moving average, then you have confirmation of the trend and the direction in which to trade. Trading counter to this confirmation is trading against the trend and this will often cut into your profits.
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2. Trading when price is too far beyond the moving averages.
When price is moving strong and it's beyond the moving averages, looking like it is going to continue to run in the same direction, it is all too likely to retrace back before going on. Trading at this point will often cut into your profits.
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3. Not waiting for the retracement to happen first.
Price can be counted on to move in somewhat of an up-and-down wave pattern. If the long-term and medium-term moving averages are going to hold, price will move back toward them repeatedly before continuing on these established trends each time. Not letting price retrace and approach these moving averages before making your trade will, again, cut into your profits.
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4. Not getting confirmation of price movement before trading.
Price can be said to move in three basic patterns: trend, sideways and breakout from a sideways pattern. The sideways pattern is most frequent. And catching the breakouts are the most profitable trades to make. These breakouts are often very tempting to get in on but most of them do not continue these moves. Not knowing how to get confirmation of these breakout moves as they happen and falling victim to all those "head fakes" will, again, cut into your profits.
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5. Over trading.
This can take several forms. Here's one of them: You can (and probably should) take another trade in the same direction when price bounces off of the long-term moving average and then crosses the medium-term average. However, you should NEVER take another trade when price just bounces off of the medium-term moving average. That bounce is likely to be just part of the larger move price is making on the way to bouncing off the long-term moving average. So, attempting to trade it will most likely, again, cut into your profits.
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Learn to use these vital principles in all your trading to preserve your account and improve your profits.
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Tim Ottavi,
ForexMastersOutlet.001@gmail.com
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(This is taken from a pdf document, the full text and screen-shot illustrations of which you can get from Forex Masters for free here.)