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Forex Trading: A Few Mistakes to Avoid

by Olufisayo
Forex Trading Mistakes

The forex market hardly has any barrier to it. One can actually make a foray with as low as USD 1! All you need is just a computer and internet connection to initiate trading. However, ease of entry should not really be equated to ease of trading or for that matter with the ease of making profit.

As someone willing to make your foray into this industry, you should make yourself aware of the common pitfalls faced by traders. Forex remains a high leverage proposition, and repetition of these mistakes can actually result in total loss of capital.

Documented below are a few of those mistakes.

Forex Trading Mistakes

You are not using a stop loss while day trading

It is very important to have a stop loss for each and every single forex day trade that you make. A stop-loss remains a potent tool which automatically gets you right out of the trade if the market moves against you by a particular amount. In other words, having a stop loss actually means that you are steering clear of a losing trade. You should be sagacious enough to place your stop-loss right at the time when the day-trade is taken and not really after that.

Only over-confident traders don’t put stop-losses. If you are not putting a stop loss you are perhaps too confident that you will not experience a losing trade. And that’s perhaps way too much of an assumption. The fundamental market analysis might as well have told you that the market is going to move in your favor today. However, do let us tell you that the long-term fundamental analysis doesn’t really help when it comes to day trading or short-term price movements. Short-term may also mean that good and bad investments are actually acting quite the opposite of how they should act.

You are pre-positioning only based on News

It is important to acknowledge that though traders know that news events will move the market – but the news solely will never really tell you in which direction exactly the market will move. You might as well come to know from the news that the Federal Reserve will not raise the rate of interests. However, you cannot really ascertain the kind of impact that this particular news will actually end up wielding.

You are involved in day trading without a plan

Before delving into the details of the common mistake, you must make yourself aware of what a trading plan actually is. A trading plan can very simply be described as a written document which includes every detail of your day trading plans (like when you are going to trade, how you are going to trade etc). You need to ensure that you are actually following a trading plan in a precise fashion. You should at first take the trouble of preparing a written plan. You should be careful enough to make it precise so that it’s easier to follow. Most of the traders out there don’t even prepare a trading plan to start off with!

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