Common Mistakes Every Beginner Should Avoid In Forex Trading
Monday, January 6, 2020, 6:00 AM | Leave Comment
Forex trading means the exchange of international currencies for business or traveling purposes.
Suppose you live in France and you want to go to the U.S., then you need to exchange your country currency to American currency i.e., convert Euro into U.S Dollars.
Forex trading can be easily done online also. It would be best if you had some foreign currencies, a laptop, and an internet connection.
Many people do Forex trading to earn money. If you want to earn a profit from Forex trading, then you have to understand the market situation. But it is not so easy to earn a profit; you have to set some rules and regulations to avoid mistakes during trading.
Below are some rules which can help beginners in avoiding some common forex trading mistakes:-
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Lack of Forex Education
If you want to earn profit from forex trading, you should execute a specific strategy. For that, you need to study the market status, know the time of entry/exit, improve your trading skills by reading books and articles. Besides subjective knowledge, you should do a lot of practice on a demo account. Demo trading helps you a lot because, with this account, you can test different strategies for earning profit. Once you are confident about your applied trading strategy, you can open your live trading account and start doing some actual forex trading.
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Not Following the Plan
Without a perfect plan, you might face a great loss in forex trading. A successful trader always sets some rules like– money management, when and how to enter the trade, the point of exit, the amount of money to risk, etc. You can’t operate trading based on emotion; you should spend time and energy to develop a specific strategy for trading. Trading without a plan means “a plan to face failure and end up losing money.”
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Take High Risk
You should maintain a risk level before losing everything in forex trade. Though the amount of risk level is different for different people. The risk-taking capability of an individual depends a lot on time and account. But, if it goes out of control, then it will be impossible to return to the initial financial stage. You should keep minimum risk capital to trade more money, and this will help you to stay longer in the market. The golden rule of risk management is – kept 1% capital for risk per day or per trade.
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Selecting the Wrong Broker
In forex trading, a beginner always takes help from a broker. Choosing a good broker requires lots of care, research, time, and effort. First, you should test the broker by going for smaller trades. Remember, don’t accept any eye-catching offers offered by them. There are many trustworthy agencies where you can find a good broker. After finding a good broker, you can safely hand over a large amount for forex trading.
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Not Focusing on Longer Time Frames
Forex trading time frame divided into 3 parts—Long-term, Medium-term, and Short-term. The long-term frame operates between several hours to 1 week or a month. Medium-frame runs between several minutes to 24 hours, and a short-term frame lasts for some seconds to 4-hour. The long-term frame doesn’t suit everybody as it requires a constant income, which slows down your trading frequency, and you are unable to make fast decisions.
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Excessive Use of Leverage
Leverage means to borrow money from others to increase the profit level by keeping risk capital minimum. In forex trading, a leverage act like a double sword means either you can earn a profit, or you may face a loss if your risk level exceeds the limit line. The brokers offer leverage at a ratio of 1:500; by using this ratio, a trader can make 500 U.S.D instead of 1 U.S.D. But it is also noted that the trader can lose all his profit quickly as they are getting too greedy due to excessive leverage offered by the brokers.
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Having Impractical Expectations About Forex Trading
A trader’s impractical expectations can push him to make mistakes in forex trading. To stay long in the market, one has to set some rules like—entry time, monitor the indicator, technical tools, exit times, potential returns, and set the unit of profit. A trader sets these rules after doing a lot of market research. But sometimes beginners put their step in the wrong place because they want to earn a lot of profit in a short time, which would, in turn, to face them a great loss.
Throw us a like at Facebook.com/doable.financeAuthor Bio
Vicky Scott is a financial analyst and currently works as a writer for MyFxTools. He writes about forex tips, research and trading strategy on blog Inside Forex trading. He has been contributing articles to Engine Forex for years, with topics focusing on the different areas of forex trading – from a beginner’s guide to an expert’s point of view.
