Managing your money and personal cash flow is vital to financial success because most of us won’t win the lottery or receive an absorbent inheritance to cruise through life on.
We always work hard for our money and want to make the most of it. When it comes to handling money, most of us aren’t as rational and logical as we think. Like losing weight, we know we need to eat less and exercise more but often can’t bring ourselves to do it.
A similar thing happens with money. We need to understand the most typical financial/psychological traps, then shift the way we make specific investing and purchasing decisions.
We think we know what to do, where to invest, ultimately failing to see hazards along the way.
The wealthy think and function differently regarding money and investing. So rather than looking for benchmark opportunities, the key to making better financial decisions starts with identifying the most common problems.
Excessive leverage is one of the ways to turn winning situations into a loss over the long run. Risking anything more significant than 5 % of your account will put you in the danger zone. Leverage can be a beautiful thing if a trade moves in your direction, but it is a deadly trap if the market moves against you.
Have you ever made vast amounts of money on a DEMO account? Perhaps you have become a virtual millionaire? After making consistent profits on the demo for 3–6 months, try opening a mini trading account with a small amount of money that you can afford to lose. You need to make sure you can handle the psychological pressure of trading real money before you start thinking about trading large amounts of capital.
Front-Running is a pretty much an unethical business practice, where:
It happens mostly with stock trading, but it can happen to Forex traders too. Usually, HFT (High-Frequency Traders) try to front-run their rival traders.
By using specialised software, an HFT trader can detect orders from other traders then jump in front of that trade.
CNBC quotes front-running as: “…traders who use lightning-quick computer program — high-frequency trading — to detect orders from rival traders, then jump in front of that trade; with the effect that the rival has to buy at a higher cost and the value of the front-runner’s purchase goes higher.”
The mistake that has cost me thousands of euros over the years. It also took a toll on different business relationships. If you assume that picking a trading buddy/business partner is similar to making a critical decision to hire someone, then you are very wrong. If you make a bad hire, you can easily let that person go. No emotions attached.
But, if you tried building up your business around the wrong person, then your reputation, finances and health might suffer significantly. Choosing a trading buddy is one of the most significant business decisions you can make and a common money trap.
Fortunately, I have Chris Svorcik as my trading buddy, so I feel very comfortable and happy to have him as the indispensable part of Elite Currensea. I am also delighted to have Nikita Barabanov with us who is an expert in marketing and our VP of growth. We all run Elite Currensea together. But the most important is that the 3 of us have been friends for years.
I have been trying to avoid all money traps for years now successfully.
If you got caught in a money trap, what would you do?
Cheers and safe trading,