Emotion-driven decisions, coupled with impatience, can be a threat to your financial health
2020 has seen the flooding entry of motivated Forex trading newcomers. But we have also noticed the trading mistakes that they have made in the way. Such mistakes, if not rectified, can discourage the traders and cause them losses. Let us look at the ten mistakes that one should avoid to be successful-
1. Lack of Proper Trading Education
Before risking capital in trading the Forex market, acquire sufficient trading education and clock enough chart time to learn price movements and patterns.
2. Misuse of Instruments (Leverage, Stop Loss, Indicators, Candlesticks)
Make sure to properly understand the key factors and variables of Forex trading and how they are related to each other. To get a better edge, you can go through the hundreds of online content that is available.
3. Risking More than You Can Afford to Lose
You should set a percentage for the amount you are willing to lose in a day. If you can afford a three per cent loss in a day, you should discipline yourself to stop at that point. Day trading can become an addiction if you let it. Play with the money that you have set aside, and stick to your strategy.
4. Choosing an Unsuitable Broker
Depositing money with a Forex broker is the most significant trade you will make. If it is poorly managed, in financial trouble, or an outright trading scam, you could lose all your money.
Take time in choosing a broker. You should consider what you want to accomplish, what a broker offers, and make sure to use reliable broker referrals sources. Then, test the broker using small trades at first, and don't accept bonus offers with their services.
5. Taking Multiple Trades that are Correlated
If you see a similar trade setup in multiple forex pairs, there is a good chance that those pairs are correlated. That is why you see the same setup in each one. When pairs are correlated, they move together, which means you will probably win or lose on all those trades. If you lose, you have multiplied your loss by the number of trades you made and vice-versa.
6. Minimal research
Studying the market as it should be will bring light to market trends, the timing of entry/exit points, and fundamental influences—the more time dedicated to the market, the greater the understanding of the product itself. Within the forex market, there are subtle nuances between the different pairs and how they work. These differences need a thorough examination to succeed in the market of choice.
7. Emotion-Based Trading
Emotional and impatient trading often leads to irrational and unsuccessful trading. Traders frequently open additional positions after losing trades to compensate for the previous loss. These trades usually have no educational backing, either technically or fundamentally.
8. Denying the Importance of Maths and Statistics in Trading
Maths and statistics are boring and hard, but it does not matter whether you like it or not. As a trader, you have to understand basic mathematical concepts. In the end, trading is nothing but juggling probabilities, calculating odds, and trying to move them in your favour.
9. Lack of a Trading Plan
A trading plan and a trading journal are an essential part of a Forex Trader’s arsenal and are instrumental in avoiding other mistakes and ensuring constant improvement.
10. Skipping Trading Practice on a Demo Account
Don’t skip the opportunity to get acquainted with Forex trading by engaging in a demo account’s potential. This also indicates a broker’s seriousness towards its services: giving a comprehensive, risk-free, and hands-on introduction into trading by offering educational infrastructure before delving with your funds into a live trading account.
The author is Official Speaker, OctaFX webinars
DISCLAIMER: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.