Studies have shown that the number of unsuccessful forex traders today by far exceeds the number of successful ones. Over 70% of forex traders across the globe have been ranked unsuccessful. The highest number of unsuccessful forex traders came from beginners who have less than one year of experience in the market.
This category of traders was found to be very prone to losing their capitals frequently in the market due to common mistakes they make while trading. These mistakes range from choosing the wrong brokers, overleveraging, poor risk management, etc. These mistakes put together always cause traders to lose a large part of their capital while trading. This work has therefore examined these common mistakes that traders fall victim to while trading today. Our conviction is that taking note of these mistakes will help traders to reduce their risk exposure to the market and become more profitable while trading.
What Is Forex trading?
Forex trading is an organized trading platform that enables traders across the globe to exchange different currencies and other valuable assets. Often, people have different reasons for indulging in forex trading. Travelers for instance, indulge in forex trading to make spending when they arrive at the new country very easy for them. Investors on their part indulge in forex trading to preserve the value of their capital over time against rising inflation. A vast majority of traders today who choose to trade forex as CFDs using online trading brokers simply do so to benefit immensely from the market volatility and to grow their capital over time especially, when they make the correct predictions for future price targets of the various currencies they trade.
Common Trading Mistakes Every Forex Trader Needs To Avoid Today
- Overleveraging: One major reason why forex traders lose money easily in the market today is because of the big lot sizes they choose for trading. The fact that some brokers offer traders high leverage for trading, often tempted them to choose excessive lot-sizes for trading contrary to the required lot-size due to each account. For instance, the lot-size for a trader who has only $100 in his balance is 0.01. Neglecting this, to choose a higher lot-size as 0.03 which is common among beginners today endangers the trader’s capital in cases of high market volatility. This increases the trader’s vulnerability whenever the market goes against him.
- Neglecting to place stop-loss: Often some traders are so anxious to open a position in the market that they neglect to place a stop-loss to their orders to protect their capital in cases of strong market volatility. This often led to traders losing their entire capital whenever the market goes against them by several pips.
- Opening a particular position multiple times: Vast majority of traders today fall victim to opening just one position multiple times in the market today. For instance, a trader could be found opening a buy order for XAUUSD up to five different times. This increases the trader’s risk exposure whenever the market goes contrary to his forecast.
- Choosing an unregulated forex broker: An important consideration every trader needs to pay attention to is the broker they choose for trading. Choosing an unregulated broker often created difficulties in withdrawals after depositing with such brokers. Only brokers registered with the regulatory agencies are recommended for trading at all times.
- Not learning how to trade before proceeding to trade: There are some beginners today who suppose they can easily predict the market direction without learning how to trade. Such traders find themselves easily trapped in the market especially when the is a change in the market trend.