There has been a surge of forex brokers that are available online and greedy and overreaching traders get trapped in the forex market. Traders get infused with adrenaline whenever the market goes volatile. It makes traders excited. Predictability is boring whereas uncertainty is euphoric and pumps the blood. The mistakes discussed below are potholes that some traders succumb to.
Failure to Create a Trading Plan
In the wise words of Winston Churchill, ‘He who fails to plan is planning to fail’. It is paramount that you enter the forex market with a plan. Below are a couple of questions you must determine the answer to before beginning to trade.
Reading the chart, which factors tell me that I should go long or short?
Which charts deserve my attention?
These are the fundamental charts and concepts that you should know:
- Relative Strength Line
- Volume and Price
- Moving Average Line
What price am I aiming for?
Settling on a price objective helps traders in making informed decisions about when to purchase and sell.
What is the amount of money that I choose to voluntarily risk?
A person’s risk appetite and tolerance determine how much money they are prepared to put on the line for investment. One percent of their entire account balance is acceptable for some, while up to three percent is acceptable for others. However, you should avoid doing trades where you stand to lose more than 2% to 5% of your capital in a single transaction.
How much do I aim to gain?
The price level you choose as your profit goal will vary based on the chart. The two most often utilized technical indicators, in addition to the average daily price, are support and resistance.
Resistance and Support Marker
When falling prices stop and begin to rise again, support can transpire. However, the opposite happens with resistance. A new level will be created when the price breaks the resistance or support point. Bringing these altogether may aid in ascertaining points where the price may alter course albeit inconsistently accurate
The Average Daily Level
The daily high and low price that is the average for an exact time are presented here. Look over the US earning calendar if you are a stock options trader. The calendar has a substantial impact on prices.
Allowing the Irrational and Emotional Mind to Take Over
When emotions are on a high, intelligence is proportionally low. Cut your losses and withdraw. Return when you have recovered from your disturbed state of mind. Even the slighted tilt may cause unfortunate results. Most forex brokers offer leverage and can be a double-edged sword if you let emotions take over your trading decisions.
Choosing to be Unengaged or Uncommitted
The difference between a good trader and a great trader is their level of commitment and engagement. The forex market is interconnected and dynamic. You may need to do multiple things like planning, researching, and establishing your strategies. However, the bounty is absolutely worth it. It is vital to educate yourself and keep tabs on incoming market events to be successful.
Failing to Take Risk Management and Correlation Into Account
Poor risk management can screw a trader over regardless of the trader’s intelligence. To mitigate loss or risk, risk management is vital. As with passive income, diversifying your forex portfolio can help cut your losses in case one part fails. A realistic profit can be made by ascertaining the correlation between forex industries and pairs.
Conclusion
Taking everything into account, the micro is imperative to trading success, but we must not forget the mental game. It does not matter what you know if you are in too much of a disturbed mind to apply what you know. It will all be worth it.
