Forex Mistakes That You Should Avoid
All forex traders make mistakes, but the successful traders learn for the mistake they and others make. It is important that you know about some of the common mistakes made by traders so you can learn to avoid them. One you know what these common mistakes are you will be able to trade around them and lose less when you are trading.
The first mistake that many traders make is averaging down. Averaging down is a technique that many traders come across where a position is held even when it starts making a loss. The trader will increase the amounts in the trade and wait for a turn in the trend. This technique is dangerous and often leads to more losses than gains.
The second mistake that many traders make is pre-positioning their trades before economic news is released. There are certain economic new reports that affect the way the forex market works. It is recommended that trades be closed before the news is released because of the fluctuations that can occur.
The mistake that a lot of traders make is thinking that they can predict what the market will do. There is no way to accurately determine what the market will do in the future. To avoid this mistake you should never open a position before the news has been released and you can see what the market is doing.
The third mistake that trader make and the second one related to the news is trading directly after the news has been released. Once the news has been released a trend usually starts. However, this is often a false trend which reverses before picking up again. When this happens traders are often stopped out and they lose the edge they had with the position.
The fourth mistake that many new and experienced traders make is to risk more than 2% of their account balance. It is recommended that you never trade more than 2% of your account as part of you risk and money management. If you risk more than this when you hit a string of losses you could potentially lose your entire account balance.
When you calculate what 2% of your account is you should include any leverage you are going to use. While leverage increases the return you may make it also increases what you stand to lose. You must take the amount of leverage you are using in the trade into account when you calculate what 2% of your balance is.
The fifth mistake that traders make is having unrealistic expectations. A common myth about the forex market is that you can make money quickly and this is not true. You should expect a realistic return on your time and the amount of money you are putting into your trading. It is very hard to make large amounts if you are invest very small amounts of capital.
There are five common mistakes that new and experienced forex traders make. When you know what these mistakes are you can easily avoid them and be successful in your trading.