Most of the time, the level of anxiety in taking a new job or going on that first date leads the individual involved to make some mistake or other. In online forex trading, the situation is no different. People enter into this market and, due to its overwhelming nature, they keep making one mistake or the other. We take a look at some of these mistakes and how you can avoid them.
Having vague FX rates trading plans
In the first few weeks of FX trading, traders are often deeply engrossed in the workings of the market. Unknowingly, they are caught up in the impossible venture of trying to follow the market tick by tick; and at the end of the day, they end up crashing their trading account.
Most new traders are guilty of this. They place a sell order as soon as the market ticks lower by a few pips, and as soon as it starts going higher again by a few pips they quickly close out the first position and enter a buy order.
To avoid this chaotic approach to FX rates trading you need to devote time to learning a trading strategy on a demo account before you even open a live account.
Trading without a stop loss
Trading the FX rates market without a stop loss is the same as going for a swim in shark-infested waters with an open wound. It is only a matter of time before the inevitable occurs. The individuals who preach about not using a stop loss in their trading are the ones who never make any headway in trading. Their forex trading career is nothing but a never ending circle of losing and reloading the account – at least, until they have nothing left to fund the account with anymore. Use a stop loss and place it appropriately so you’ll be able to easily know when you are right or wrong.
Trying to take revenge on the market
When many traders lose a trade, they don’t accept the fact that they were simply wrong on the trade. Instead, they set out trying to get back at the market as quickly as possible by re-entering the trade again. So, even though this in a martingale-style approach – doubling the position size before re-entering – at the end of the day, you will only end up losing your trading account.
Learn to accept the fact that you do not have any influence on the market and accept your losing trades when they come, while all the time being relaxed and waiting for the next position.
Leaving losing trades to run
Many FX rates traders make the mistake of removing their stop loss or moving it bit by bit hoping that the market will come back in their favour. What they fail to understand is that with this method, they will only be multiplying their losses by not exiting at the point they were supposed to do so.
Placing unrealistic targets
90% of new traders have this problem. Due to the way forex trading is painted as the ticket to fast success – by marketers and system sellers – many people come into this market with $100 hoping to make $100,000 by the end of the year. It doesn’t work that way. Even though the forex market is one where 4 trillion dollars exchange hands every day, the amount you will make as profit is dependent on how much you are trading with.
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