Human error is common in forex market. These trading errors are made by novice traders on a regular basis. However, once you get aware of your mistakes, you get efficient in trading. All traders make mistake, irrespective of their trading experience. Below here are some mistakes which forex traders should avoid:
- No trading plan
Traders who don’t have a trading plan have a haphazard approach. Trading strategies should have predefined methods and approaches. It prevents a trader from making irrational mistakes. Hence, you should devote time and have a good trading strategy. Without proper plan, you will end up making trading mistakes. You can practice your strategy on a demo account.
- Over leveraging
Margin/ leverage is all about using loaned money for your forex position. With the help of this spec, you can use less of your personal capital. The leverage use magnifies both your gains and losses, hence it is important to manage your leverage amount.
Brokers such as 101Investing offer high leverage levels like 100:1 which puts new traders at great risks. It is important consider whether you are ready for such leverage or not, rather than get over excite and over leverage.
- Problem of time horizon
Time investment works in collaboration with the trading strategy you are planning to implement. Every trading approach is suitable for a particular time horizon, hence you should understand the strategy and measure the estimate time frame for which you need to use. For instance, a scalper will opt for short time frames while a position trader will choose longer time frames.
- No research
Forex traders should do proper research to implement a particular trading strategy. Studying the market, its trend, pattern is very important. It is important to analyse the fundamental influences, time of entry and exit etc. The more time you dedicate to the market, the better you will understand it.
- Bad risk to reward ratios
Positive risk to rewards are ignored by the traders which leads to poor risk management. A positive risk to reward ratio like 1:2 is bout profits being double the potential loss during a trade. However, setting irrational ratio may lead to failure of your strategy. Improper risk manage is the most common mistake done by traders
- Emotional trading
Emotional trading causes irrational and unsuccessful results. Traders often open positions after losing trades to compensate their losses. Such trades don’t have any fundamental or technical backing. Hence a trader should avoid such trades.
- Improper trading size
Trading size is important to every trading strategy. A lot of traders pick unsuitable sizes according to their account size which increases the potential risk and could possibly wipe out your complete account balance. If you have an account of $10000 then you can take a maximum risk of $2000.
101Investing is one of the best forex trading platforms which help you to trade positively and rationally. You can get guidance about your trades and perform live trades with real account on any forex pair you want.