There are numerous reasons because of which FOREX is popular. More than $5 trillion of trades on daily basis shows its high liquidity. The market trades by the needles of the clock and provides high leverages and benefits to the brokers.
A low barrier to entry makes the Forex market easily accessible and reachable by everyone across the world. Only you have to do is, buy a computer, laptop, or phone and connect it to the internet, spend a few dollars and you are ready to go with day trading in FOREX.
Forex trading is both recompensing and challenging as well as depressing and disheartening because of the common mistakes made by the traders. No matter if you are a new trader or an experienced one, you need to avoid common mistakes while trading in the Forex market.
As this is the most refined market, many of the traders end up with their trading account by making numerous common mistakes. Let us take a look at these five common mistakes, which needs to be avoided by every trader.
Not Preparing An Effective Trading Plan: Without an effective plan of your trading activities, you cannot survive in the Forex market as a good and successful trader. You always need a trading plan because without this you will continuously suffer a river of losses. So Before heading towards the Forex market, take some time, and develop a trading plan along with money management strategies.
In an effective trading plan, you need to work on these categories such as:
- Trade entry strategies.
- Trade exit strategies.
- Your budget.
- Pair of currency.
- Profit and stop-loss points.
- Money and risk management approaches.
These points must be answered while preparing an effective trading plan because many of the traders make the mistake of not preparing their trading plans and thus suffer losses.
Lack Of Proper Study: Another common mistake is not conducting proper research, studies, and explorations. The environment and the surroundings of the Forex market are fully dynamic and affected by different fundamental factors such as economic, political, or technological factors. These factors have influence over the trade market, its opportunities, and risks. Therefore, the study of these factors is crucial for traders.
Numerous traders make the mistake of only focusing on maximizing their profits and not exploring the facts or figures, which is ultimately affecting their trade activities. To avoid this common mistake, you are required to explore widely the trading approaches, trends, and market movements. Explore and study the following aspects:
- Economic factors such as inflation, deflation, interest rates, and unemployment rates that you think will affect your currency pair.
- Market key drivers.
- Strategies and techniques to maximize the profits and to lower the risks.
No Limit Of Stop Loss: Not having a stop loss point will always push you into the river of losses. If there is, a decline in prices then a stop loss pulls you out of that trade. This helps you to have a less risky investment or trade because when you use a stop loss point in your trading then the investment becomes less risky.
Besides, if you are continuously suffering losses on your trade then stop-loss restricts further losses.
Overlooking The Facts, Statistical Figures, And Events: The currency markets have been heavily influenced by the news, economical facts, and the decisions are taken by the central bank. These updates, news, and facts follow a planned agenda or a program, which makes it easy to predict their occurrence. However, we cannot predict what will be the news or events, what will be the market trends, and how the market will respond to them.
Neglecting these facts, statistical figures and events will be a mistake. Keeping an eye on the news events and statistical data will be beneficial for trading, as it will help in defining the trends and strength of the currencies you are pairing in.
Continuously Losing And Taking No Measures To Bad Trade: The nastiest mistake that the traders make is continuously losing and hoping that a bad trade may result in something good. Investing more money in a losing trade and taking no measure to fix that bad trade will always result in substantial and terrifying losses.
This is not a wise technique of throwing more money into a bad trade, which is not generating a profit and only dumping your funds, will always worsen your losses.
The moral of the story is that no matter if the structure of your investment is correct but sometimes the movement in the pairing currency does not always result in your favor. Correspondingly, if you will invest your funds in a trade where you are losing money Continuously, will not generate sound profits and you will be failed to become a successful trader.
“Mistakes are common and everyone does so. However, if you will repeat your mistakes and will not learn from them then you will end up ruining your trading account. Always learn from your mistakes, even it is much better to learn from other’s mistakes and not repeating them by yourself.”