Biggest Foreign Exchange mistakes ever made

Forex trading can be a very lucrative career. You don’t need to have a degree or a certificate to start trading. However, it requires a lot of knowhow about the business and foresight to be able to make it into a profitable business and a cash cow. Here are some mistakes that should be avoided when trading in forex.

Mistake #1: Trading without a plan

Many neophyte traders jump on the bandwagon and enter the business without doing their homework. Because of “beginner’s luck” people usually get the notion that they can just wing it, which leads to losses. Just like in any business, a trading plan is necessary to put direction and set boundaries. Some who forget to plan end up losing money for themselves and/or their clients. Newbies should start by studying glossary, reading up on news and analyses a lot, and asking for expert advice. Mistakes are expected but should be limited and managed. In such situations, it is best to work with a reliable broker. You can find brokers in sites like forex broker review.

Mistake #2: Trading still even when losing

Many traders fall into the trap of thinking that they may hit the “jackpot” trade with the next one. However, some keep on trading even when they are already bleeding money. Trading in forex involves some risk. But the risk involved need not be debilitating. In this business, traders must keep an eye on their win-rate ratio and risk-reward ratio. A trader should maintain a win-rate of above 50%, and a risk-reward ratio of at least 1 (above 1.5 is the best). Always remember never to trade more than what you can afford to lose and set a stop loss order.

 

Mistake #3: Trading after News Hits

In forex trading, it is quite imperative that news is constantly monitored and brokers keep themselves abreast on what is happening on the market. One common mistake in trading is made when decisions are made based on the news. Always bear in mind that the market is volatile and it is quite difficult to predict how the market will respond. In such cases, just stick to your trading plan.

To avoid these pitfalls, it is absolutely necessary to study the market unceasingly. As the market grows, one has to keep up with the changes and nuances of the market. One important thing that should be studied is risk management, i.e. to know how much to trade and when. Taking risks is inevitable but it should not lead to severe losses. Patience is also an important factor when trading. Waiting for the right trade and right time will certainly pay off.