Trading the forex can be very much intimidating since extensive knowledge and self-discipline is required to make the profit from this high leverage market. “It’s in human nature that they will always love to win and make the profit”. True professional traders who are now successful in Forex trading has developed unique sets of skills which go against the very human nature. They accept losses happily in this market. It is often said that almost 95% of the traders lose money in this industry. So, “Why they are losing?” They are losing because all of them are making the common mistakes in the market.
Three common mistakes in Forex trading
Adding to the losing position: Most traders try to average down their loss by adding more position with higher lot size in the forex market. If a trade goes wrong against 50-60 pips then the trader open a new position along with the losing one. “The moment a trader add position to a new trade is the moment when the traders increase his risk percentage by 50%”.It’s true that averaging might work sometimes but the chances of making a good profit by averaging or hedging is very less. There is a saying in the forex market that “Cut your loss early and let the winning one run”. But people doesn’t seem to realize this simple truth instead they keep adding the new position to their losing trade and end up by blowing their account.
Trading the news: Many traders wait patiently for the big economic news release in the Forex Market. “The Economic news release is the fundamental catalyst that drives the big moves in the market”. Trading the news require perfect technical and fundamental analysis. Taking the trade just before the news is nothing but “gambling”. Even after the good economic data release the currency pair might fall tremendously due to other factors. Basically, yet the market drops down, triggering the stop loss. In this circumstances trader should not re-enter the market for loss recovery.
Money management: Many traders have often asked is there any “Holy Grail” in the forex market? After lots of analysis and research, they found that there is no holy grail. Hold on! Who said there is no holy grail? Proper money management is the Holy Grail for professional traders. Since the forex market offers very high leverage you investment should be well protected so that it’s not affected by the double-edged sword of leverage. Believe it or not, if you know how to keep your account balance then you don’t need to know how to make the profit. Profit in the forex market comes with the course of time. Those who have “Get rich quick” are doomed in this market. Like any other business, making the profit from this financial market is also a gradual process. Professional traders never risk more 2-3% of their account balance in any single trade. Risking is not always about percentage calculation rather managing your trading fund efficiently. Professional traders take reasonable risk according to their tolerance level.