Forex is one of the most liquid and most straightforward to master markets today. So why not make the most out of it? Before you tackle various broker reviews online like FinacialCentre Review to see their trading offer, here is some advice. With this advice, you will be on top of everything a beginner and seasoned trader has to know.
Cut profits too soon.
After a period of loss, and with all the stress this can generate, some will cut their profit too soon, no matter how small.
As soon as the balance is positive, the transaction will be closed.
We, therefore, see novice traders running losses of € 800. Once the position becomes a winner of € 5, they close the transaction, relieved to no longer be in a negative situation. You have to try to win at least 3 for two risks.
Neglecting the impact of the spread
We can think that 1 pip will not change anything. However, this may be true on one or two transactions.
But if you make two trades per day in a year, the difference will be 520 pips or about 26% if you are used to using 5: 1 leverage.
A Forex trading strategy can therefore generate profits with a spread of 1.5 but lose with a spread of 2.5. So don’t overlook any detail.
When trading Forex, you sometimes have to be patient because you have to look for the right opportunity, wait for market conditions to be favourable to the strategy you are applying, etc.
However, beginners will mistake taking a position without respecting the plan or strategy previously put in place because it is more enticing to be in the market than to follow its evolution.
Be rigorous with yourself in respecting your trading plan.
One of the most common mistakes and also one of the worst things to do is averaging down trades. It may seem logical when the market falls sharply to double its position to lower the cost price.
There is a specific mathematical logic in this reasoning, yet the trader who goes downward makes two mistakes: he hopes that an unfavourable situation becomes favourable again. The trader will think that the price level that was reached will inevitably be achieved again soon.
Look for miracle methods.
Unfortunately, there’s no miracle method or a foolproof martingale.
Many newbies on the market enter the trading looking for a way to generate profits from the comforts of home and without effort quickly.
While it is evidently possible to perform very well in the currency market, there is no easy way to make easy money in the financial markets, like the goose that lays the golden eggs does not exist. Recall that 70% of retail traders lose money according to the study of retail investors’ results on CFD and Forex trading.
I hope these few lines can help you get started on the right foot and avoid making the biggest mistakes, but rest assured if you make a few mistakes because that is also part of the learning process.