Top 6 Avoidable Mistakes in Forex Trading
New or experienced traders will make mistakes under uncertain circumstances or when facing pressure. But Forex trading offers a lot of chances to those aspiring traders to make the most out of this industry. In fact, it is the easiest to access day trading markets in the world. Just by having a good internet connection, a computer, and a few bucks, you can start trading. It’s exciting to trade especially if you are still new. However, you must take into consideration the possible mistakes that you might make and how you should deal with them.
Stop Trading When You Keep Losing
Loses are always present in trading. However, you must always keep in consideration these two trading statistics – the win-rate ratio and the risk-reward ratio. Your win rate is based on the trades that you won which is expressed in percentage. For the risk-reward ratio, it is the win relative to the number of your losses on an average trade. If you find yourself on the losing side all the time, take a deep breath and move away from your computer for a while. Find a reputable Forex broker in UK too.
Trading Without Risk Management Strategy
When you trade and you win some profits, you feel like you own the world. However, when you encounter a huge loss, that’s the time you realize that it’s always a happy day when trading. With the use of a stop loss, you are able to mitigate the losses you incur. You may still encounter a couple of losses but it won’t be that huge compared to the ones you’ll have without a risk management tool.
Risking Money Which You Can’t Afford To Lose
Another important part of a risk management strategy is knowing the amount of capital that you are willing to risk each time you trade. For day traders, their ideal risk percentage is 1% of their capital. In this case, you must use a stop-loss order to close your trade automatically when you have lost 1% of your entire trading capital. By doing so, even if you encounter a couple of losses, only a small amount of your capital will be lost and you won’t be bankrupt.
Do Not Try To Win Back All That You Lost
Surely, losses are devastating. However, no matter what happens, you should never ignore your trading plan. Do not be tempted to trade more than what is stated in your trading plan.
Anticipating the News
When there are news releases about economic and financial situations, there could be a rise or fall in the price of currency pairs. However, you must not anticipate the movement of the currency pair before the news hits because you might be wrong about it. There are times when the prices move in both of these directions, very quickly and sharply before you can even pick a direction. When this happens, you will most likely suffer huge losses in seconds.
Choosing the Wrong Broker
This is very important in Forex trading – you must choose a reputable and licensed Forex broker in UK. Chances are, if you are managed poorly or fall into a bogus broker, you will lose all your money before you even open a position in the market.
