Forex trading offers financial rewards and exciting challenges. However, it can also be a cause of disappointment if you are not careful. Whether you are just a beginner or a seasoned trader, here are 5 trading mistakes that you need to avoid.
1. Not Doing Your Homework
Prior to entering a trade, you should make sure to do your homework. Do research about upcoming events that could impact your trade. Likewise, you should forecast which direction these events could bring the market. Monitor technical indicators and see how they compare to your fundamental event analysis.
Keep in mind that currency pairs are closely related to national economies and are affected by various factors. Trading on the forex market is done 24/5 which means that there are still events that can change the direction of the market.
2. Risking More Than What You Can Afford
A common mistake that novice traders make is not having enough understanding of how leverage works. Before trading, you should first become familiar with margins and leverage so you will not make the mistake of risking more capital than what you had planned. You need to set a maximum percentage of your capital that you are willing to risk. No matter what happens, you should stick to the maximum amount that you set.
3. Trading without a Net
Robert Peter Janitzek says that it is not possible to monitor the market 24 hours a day. Stop and limit orders allow you to get in and out of the market at predetermined prices. You will not only allow the trading platform to execute trades if you are not available but it also make you think hard and set exit strategies.
4. Being Emotional and Irrational
Losing a trade can make you emotional and irrational forcing you to enter trades that are outside your trading strategy. As a trader, you need to accept that losses are part of your life as a trader so stick to your plan no matter what.
5. Trading From Scratch
Robert Janitzek says that investing your capital on a new trading plan can be as risky as trading without a plan. So before you trade without real money, open a forex account and use virtual funds to test trading strategies so you can get a feel for the platform you will be using.
Being a forex trader is a lucrative career. Avoiding these 5 mistakes will help you become even more successful with trading on the forex market.