Crucial Online Trading Mistakes to Avoid
You will always face some risk when you trade Forex. Fortunately, there are ways to minimize your risk by recognizing potentially costly mistakes before you make them. There are many misconceptions and myths about Forex trading that can lead traders into bad situations.
2 Solely Relying on a Trading Robot
While trading robots are generally easy to use and can be helpful, it is important that you always manage your own trades. Forex robots can initiate trades for you when you are not able to do it yourself but they are not able to analyze the complexities of the Forex market so you should be prepared to modify your trades when necessary.
Scalping does minimize risk because you are trading on very short intervals so losses are small. However, because short-term fluctuations are random, it is difficult to capitalize on the up and down trends. This means that you probably will not make large profits in the long-term.
4 Believing You Can Predict Future Prices
There are trends and other factors that allow you to estimate what prices will be but there is no way to predict prices with 100% accuracy. You can use indicators and other analysis tools to help you but you will never make a profit on every single trade no matter what tools or strategies you use.
5 Trading Based on Forex News
It is undeniable that the Forex market is influenced by the global economy and other international events. However, the direction of trends is influenced more by trader sentiment and how they perceive the economy than the actual economy itself. Trends that are only based on news are unreliable and unstable.
6 You Will Not Experience Prolonged Periods of Loss
This is simply not true and you need to plan for these periods so you can ride them out and still continue to trade. There are even traders who experience months of loss, so plan accordingly.
7 Using Too Much Leverage
You should only use the amount of leverage that you need. Many traders use the entire amount of leverage that is given to them by their brokers but this is generally unnecessary and risky.
8 Improper Money Management
It is vital to your Forex trading career that you use proper money management. You should never trade more than your means allow. Most importantly, you should keep some extra money around so that you can overcome periods of poor trades.
9 No Knowledge of Trading Edge
Knowing your trading edge is very important. When you know your trading edge, you can see what trades and trading strategies give you the most and the least amount of profit.
10 Lack of Discipline
You must be disciplined and diligent when trading online. Inconsistency and lack of involvement in your trades is harmful to your success. Although trading stocks and FX is not difficult to learn and does not require inside knowledge, it still takes skill. Using proper trading strategies will allow you take on the difficulties of the online market with skill and confidence.