Blog article provided by brokertested.com
Are you new to forex day trading? If so, you are likely making some common mistakes that could be costing you money.
In this article, we will have a look at 10 of the most common mistakes made by day traders. Knowing them you will reduce them and the amount of your profit can increase enough.
So whether you are just a beginner forex trader or you have been trading for a while but haven’t been having much success, make sure to read on!
Choosing The Wrong Broker
Forex brokers are the most important trade you will make. If they are not well run, or if their financials aren’t sound – they could lose all your money. It is crucial to research which one is right for what type of investing needs before making any decisions about which broker would work best with yours. Fortunately, there are enough regulated and reputable Forex Brokers for Beginners in Kuwait anyone can choose from.
Trading Without a Plan
A trading plan represents a document that outlines your strategy. It defines how you will day trade, and should include the markets in which you will be investing or losing money as well as when to invest them.
It is a great way to reduce risk and ensure profitability. A well-thought-out strategy will help you make more informed decisions when it comes time for real money trades, so a day trader should develop it as soon as possible.
Going All In
There are many reasons why you might find yourself tempted to take larger trades than normal, even if it is against your risk management strategy. The most common reason for this behavior is a losing streak or winning roll of the dice that makes traders feel as though they can’t lose – but there will always be one trade promising such good returns which makes manipulation seem like an alright decision at first glance.
In this context, we would like to mention the leverage. Most novice traders maybe tempted to use high leverage and make profitable deals. But it is not as simple as it seems – in case of losing the deal, the losses will be very large. It is one of the reasons you should trade with a safe broker Infinox that will 0$ minimum deposit and appropriate size of leverage.
Trading Without a Stop Loss
With stop-loss orders, you can take a lot of the risk out of your investment. If prices move against you by an amount that’s greater than what was specified in advance as part of this strategy for trading forex days successfully with positive results – meaning there are losses incurred but not beyond those limits due to having set stops. Then it is possible to exit trades before they go too far.
Adding to a Losing Day Trade
It is a common mistake to think that adding more money into an already losing trade will help you recover your losses. In reality, as soon as the price moves against us and reaches our stop-loss point – which could happen at any time during or after the establishment of this position. The traders will have no choice but close out whatever remaining inventory there was for things to get too far gone south again.
Risking More Than You Can Afford to Lose
The point of day trading is to take advantage when prices are favorable, but many traders find themselves addicted and unable to stop at just 1% losses. To prevent this from happening a trader should control the daily risk by setting an appropriate percentage for the amount they are willing to lose in a single bad day-trade session.
Trying to Forsee the News
The market is unpredictable. It is easy to think that you’ll be able to predict what will happen after hearing economic news, but often prices move both up or down quickly in response before settling on one direction later. This means it isn’t necessarily worth getting out of trades early because someone might buy them back at an even higher price.
Trading Based on Fundamental or Economic Data
Day traders have a very short time horizon. They focus on what is happening now and how they can make money from it. This means that fundamentals are meaningless for day traders. Your only goal is to implement your strategy no matter which direction it tells you to trade. Fundamentals have absolutely nothing to do with price movements – using them causes focus on concepts that don’t apply or make sense while day trading.
Taking Multiple Trades That Are Matching Up
Diversification means that you should trade differently each time, so if an investor is inclined to take multiple day trades at the same time they will probably increase their risk by doing this. The best thing would be not to take any position until after thorough research has been done on what kind of strategy works for one’s financial situation because even though diversifying may seem like a good idea there can also come some problems when too much diversity becomes overwhelming or confusing.
If You Keep Losing, Don’t Keep Trading
Traders should be aware of their trading statistics. These include the win rate and risk-reward ratio, which can give an idea of how successful they have been in terms of percentage wins versus losses on each trade. A day trader should keep this number high by making sure that there is enough reward for risks taken while not going too far below 1:1. Otherwise, it may lead you into losing money even when winning trades don’t do much good.
Forex day trading can be profitable if you avoid these common mistakes. Have you made any of these errors in the past? Are you making any of them now? If so, make the necessary changes to your strategy and start seeing improved results.