Earning from forex trading is really a hard way for many traders because most of traders make same mistakes again and again while trading in forex market. According to a report 75 to 90% of retail forex trader loses their money that is in range of $2000 to $35000 every trader.
Every trader can avoid from losing money in forex market if they avoid from these most common mistakes as given below in detail.
Table of Contents
Lack of Knowledge
Many of the traders don’t have enough knowledge and experience in trading. They learn little bit and think that its fastest way to make money and start trading without any strategy and trading plan. This thinking become strange for them and they lose their money in forex trading.
They don’t read trading books and have no interest in learning strategies to get success. To avoid this mistake everyone should read books, attent webinars and take lectures. And apply that knowledge on demo account until they get success at least for three month.
Missing the Trading Plan
No one can become successful forex trader until having a strong and successful trading plan. And its not import to have plan but most important is to strictly follow your plan while trading in forex market.
Trading plan can be understand as a set of rules that a trader use to make a trading strategy to become successful trader.
No Money Management
Many new forex trader don’t care of lot size and leverage and put big lot using high leverage. Forex brokers are providing high leverage and its very harmful for those who have small capital and lack of knowledge.
New trader should think about their capital that they are going to put on risk. Money management also depends on trading strategy trading style. Using low leverage and small lot size can be helpful to avoid keep losing.
Many traders think that forex is the short cut to make money quickly. So they start think about big goals that are not possible as they think. They should examine their strategy on demo account before implementing on real account.
Set your goals according to your capital and trading plan based on reality.
Over Trading and Insufficient Balance
Some new traders have small accounts and they ignore the money management. They use big lot size for trading and when their trade goes negative they add more trades that creates dangerous situation for them.
Even though you have a large account to manage, it is disastrous to over trade. Now you can simply imagine how hilarious it is to over trade on small accounts.
Before a trader starts trading he or she has to first how much he can put to risk. Now a question can rise into your minds ‘how much of our account balance is suitable to go for risk’?
The answer is 3-4%. Yes I am saying ‘it is 3-4%’, together at one time. Don’t worry this is the perfect ceiling to put into risk in forex trading. This ceiling will help you go through other trading mistakes which are not in your control.
Becomes Too Greedy
Not only new traders but experienced traders also fall prey to greed. This is one of the biggest mistakes which is very common in forex trading. Forex traders expect high returns but this is not a realistic theory to earn money rapidly. I don’t say that no trader can make high returns from forex trading. It is possible but for high returns you must have the following characteristics.
- A lot of trading experience.
- A good quality of education in forex trading.
- Exceptional analytic powers.
With these abilities you can earn even more than 50% returns on your capital.
But not all of us have such a wide knowledge and experience so the better strategy is to have a proper trading plan and goals which can help you to be successful and well experienced in FX trading.
Poor Risk Management
With great risk often comes great reward.
Yes it is true that if you do not risk you cannot expect higher gains. But in forex trading it is somewhat true but somewhat heart breaking as well. As if you lose your money while taking higher risk your account balance may become zero in seconds only.
It becomes a greater mistake in forex trading specifically by the new traders. They expect a lot of returns and for this purpose they put much of their money to risk. This is called a ‘blind strategy’ in forex trading because forex market is very uncertain market where any unusual thing happens at any moment.
Risk management is a necessary part of trading strategy and you have to risk that amount of your account balance that you can afford and manage effectively. Not more than this. With a proper risk management you can really earn greater profits.
There must be some inspiration that brings you towards forex trading and in my point of view it is most probably high returns. You may think you can double your money within few days and then you will expect more multiplication but this is not a reality.
These expectations are among the biggest mistakes that can cause failure and lose of your money. It might be true some of the traders do earn high returns but it is a result of high experience and forex education. I don’t say that you can never get high profits in trading but the path is not that much smooth that you think of it.
Strategy With No Backtesting
It is very common in forex market when ever trader create new strategy or learn new strategy they don’t try and verify it on demo account. They start using in their real time trading and lose their money.
Trading Against Trend
Trading against trends is a common mistake in forex trading whether you are a new trader or an experienced trader. The best plan to avoid this risk is less trades and trades according to trends.
Keep learning, studying, testing your strategy, following your rules, trades with plan and keeping record of your progress are some of the step that can help you to avoide making mistakes again and again.
Practice your strategy before implementing it on real account. The biggest mistake that forex trader make is they don’t follow their rules and don’t follow steps mentioned above in detail.
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