When done correctly, forex trading can be a lucrative business capable of producing great rewards. For a person who is not knowledgeable about the trade or does not take time to learn the ropes, losses are inevitable. Besides, the currency market is very volatile and changes in the political atmosphere of countries with major currencies show the effect on all others. This chart by Statista.com shows how the US election that saw currencies gain. To make the most out of the currency trade, here are the mistakes to avoid at all costs.
Lacking a Trading Plan
Every business venture requires a plan, and so does algorithmic forex trading. A proper trading plan clearly defines your trading strategies. These are what, when, and how you plan to trade. It should also indicate the time and how you intend to manage the wins and losses. If you don’t have a trading plan, you plan for failure because you will be trading in a blindfold without any clear course of action in any event.
Taking Higher risks that you can Afford
As a new trader, you may not understand leverage and how it works. The mistake can lead unintentionally to you trading more than you had in mind. A helpful suggestion is to put a cap on a maximum percentage of risk you can take at a given time. While placing a maximum percentage is important, it would be useless if you won’t stick to it. Be disciplined enough to stop when your risk limit is reached.
Going all in Without Learning
Diving in is a very common mistake among beginner traders. If you want to succeed, learn how everything works by practice. Multiple platforms offer demo accounts. This way, you familiarize yourself with how a trading platform functions without risking your money. Trading with real money without any knowledge increases the chances of making mistakes that could lead to losses.
In a bid to increase the chances of making a good trade, a trader may be tempted to take up many trades. It makes a bigger room for making mistakes and poor execution, leading to exhaustion, less time to make a good analysis, and loss of trade. Also, note that if there are any like trade setups for numerous forex pairs, the outcome will likely be similar. You can utilize ETFs to gain exposure to the currency markets. Know the best tradable currency pairs here.
Using the Wrong Broker
Using a broker can be very rewarding, but not all brokers are genuine, which means the possibility of losing all your money is real. Assess your needs versus what a broker is offering before settling. With a rise in CFD trading and countless brokers, getting the right choice can also prove a difficult task. It is advisable to test them with a smaller investment before making the intended investment.
Finally, forex trading requires a lot of discipline and patience. Even though many other factors could hinder your success as a trader, most common mistakes are avoidable. Equip yourself with proper knowledge before venturing into any live trades. Continue learning and know when to stop trading and refresh and you can be among the 10% of individuals who make it.