Your trading sucks. Or you are afraid of investing in forex trading because you are afraid of wiping out your account. Imagine depositing $100, $200, $500 or whichever capital you have set aside as forex investment only to receive a margin call after only a few trades…
You would probably walk away and spend the rest of your life trying to convince everyone how forex trading is not conducive. However, the truth of the matter would be that that you made mistakes- mistakes that you could have avoided had you traded more carefully.
Making mistakes in forex will cost you dearly. It will cost you money and your confidence. It will rob you of an opportunity to invest in one of the trades that has incredible returns for the meticulous trader.
At Kenya Forex Firm, our goal is to help you trade forex like a pro. One of the first steps to meticulous and profitable forex trading is to avoid making some of the common mistakes.
Mistake #1 Misusing Your Account’s Leverage
In forex trading, leverage lets you control huge chunks of money with very minimal deposits. For instance, if your forex broker offers leverage of 1:100, you would be able to trade currencies worth $40,000 with a deposit of $400 only. With this level of leverage, the profits can be very tidy. The opposite is also true. If a trade fails to go your way, the losses can be extremely messy.
Fortunately, many forex brokers allow you to choose the level of leverage that you would like to apply on your account.
My advice for every beginner forex trader there is to go for a leverage of 1:10 or trade with no leverage at all if you can afford a higher initial capital.
After limiting your leverage, you need to make sure that the trades you open are not too large for your account.
Closely related to the issue of leveraging is risk management. Fore every trade that you take, you should ensure that the potential profits are twice the potential loss. This way, your winning trades will always bring in more money than the losing trades are taking away.
Mistake #2 Overlying on Indicators and Other Fancy Techies
A lot of forex traders spend most of their time hunting for the perfect forex trade indicator and neglect the place where the real action takes place.
There is a sad truth in forex trading. Many technical indicators do not have any advantage over reading price action on the naked charts.
Before you are drawn into the cacophony of trading forex by relying on technical indicators, make sure that you can tell the direction the price will move from simply reading a price chart.
Don’t get caught in the nefarious pursuit for a perfect technical indicator. It does not exist.
Mistake #3 Trading Without a Plan
By failing to plan, you are planning to fail
A lot of beginner traders get into forex trading without a functional forex trading plan. However, like every other business, forex trading needs a clear plan.
It is a forex trading plan that keeps you regulated so that you do not exert unmitigated damage to yourself. In your plan, clearly outline the amount of daily profits you are targeting and the amount of daily losses you can accommodate. Once you hit this number, take a break.