Have you thought of joining Forex trading just because you feel like it will make you a millionaire after a short while? Or are you eager to start now even without proper knowledge and experience? Without a doubt, trading is a very good way to earn money but it can also be your ticket to the poorhouse. New traders often make similar mistakes over a course of time. Therefore, knowing how you can avoid these mistakes will help you avoid them in the future.
Choosing a Bad Broker
Unfortunately, not all brokers are similar. There are others who charge you with higher fees while some provide top-notch customer support. Other brokers are regulated while there are also brokers who still operate despite being unregulated. These are the kind of brokers that will most likely place your capital at risk. Pick a broker offering the market that you find interesting. It can be derivatives, commodities, cryptocurrencies, and others.
Too Many Trades Is Too Risky
Overtrading has two types: trading a lot of assets in one go and the issuance of a lot of buying and selling orders for a single asset. The problem when it comes to trading too many assets is that you will have to track each one of their information, analyze it then account for it. There is just so much to do. One thing you can do to avoid overtrading is by keeping your trades at a minimum. This way, you can be sure that each of them gets equal attention.
Managing your risks is important in finding success in trading. No trader wants to put too much risk on their portfolio. Therefore, to avoid experiencing this scary scenario, you need to know how much of your portfolio you want to risk for a single trade. There’s a general rule that traders follow over this matter. You can only risk 1% – 3% of your portfolio in one trade. This way, even if your trades go out of hand, you can still survive the loss and you can still continue to trade.
Sunk Cost Fallacy
This is the trader’s tendency to stick to their original decision even though they are on the losing end. Their reason can be since they already invested so much time, money, and energy in this trade. They also hope that the tides will turn around and the losses will become gains.
Most day traders utilize technical indicators that determine the exit and entry points of a trade. Unfortunately, no pattern is 100% confirmed until such time that they break support or resistance. Even after that, no pattern remains 100% accurate at all times. This is the reason why discipline is very important in Forex trading.
Never get too attached to a trading pattern or a signal. You must be willing to adjust to the course when there are available relevant information. Be flexible when it comes to the decisions that you make in trading because there will come a time when the decision you make now will have little to no effect in the future.