Do you know that there are mistakes we do that obstruct us from making reasonable profits from the forex market?
Though our strategy and analysis of approach was authentic, yet we still make negative returns-why? Have you taken your time to verify why you’ve been losing consistently?
Well, some of these reasons are as a result of some little error we make without bothering to take note.
“Take chances, make mistakes. That’s how you grow. Pain nourishes your courage. You have to fail in order to practice being brave”—says Mary Tyler Moore.
While there are lots of mistakes done by we traders, there are some major once that needs our urgent attention to ensure substantive progress while trading the fx market.
Here are four serious mistakes forex traders make without knowing they are.
#1 Trading without a plan.
Do you know that trading without a plan is one of the serious mistake holding traders from making reasonable profits from the market? When you trade without a plan is like travelling without a map.
The Fx trading business is a very risky business, the more reason why you shouldn’t act without a plan. Evidently, the high level of uncertainty in the market deems it necessary for you to trade any underlying asset with an effective trading plan.
In fact, trading without a plan is like risking all you have in an ocean filled with sharks. This simply means that if the market should turn against you, it’ll be difficult for you to escape from it.
So, to avoid making such a mistake, it’s very advisable that you develop a good trading plan. If you have difficulty with that, read more on how to develop an effective trading plan.
An effective trading plan guides you through the market. In fact, it tells you what to do when the markets moves against you. In addition, you have to be disciplined and trade with the plan.
Acting contrary to your trading plan is an act of disobedient. And it has been proven by market expert that it sometimes leads to a dead end.
Although, there are traders who still ignore this fact about a trading plan, if you are one, I’d advice that you note the following importance of an effective trading plan.
- It enables you to know how and when to enter a trade.
- It enables you to know how much money you’re going to risk in a trade.
- It enables you to know how, when and where to get out of a trade if you are wrong.
- It enables you to how, when and where to take profit in a trade.
- It enables you to know how much money you’re going make in a trade.
- It automatically informs you on when to exit a trade.
So, if you still want to make a living as a trader, you’ll definitely need to trade the fx market with an effective T. Plan.
#2 Trading without stops.
This is also a serious mistake traders make. But do you know that one of the active tools trader can use in the fx market is stops (or stop-loss).
Actually, stop-loss is an order in which a trader places security over his trade. And it in turn restricts the investor from losing beyond the set limit. However, if you still doubt the Impact of using stop-loss while trading, I’d suggest you look deeper into it.
Because you’re depriving yourself of a free insurance policy, that come with four solid benefits. They are as follows:
- It keeps a constant watch on your position.
- It practically removes emotion from your trading decisions.
- It practically informs you of how much you’re risking for the trade.
- It practically protects your account.
However, if you are not aware of the above benefits and still trade without stops, you are making a mistake. Though, there are traders who trade without stops and still make real money from the fx market. But, they are very few.
However, I’d advise you to weigh both their advantages and disadvantages before making your decisions.
#3 Trading with the wrong volume ratio.
Yes, you have a free will of selecting a high volume ratio to make much profit in a short period of time.
But have you also considered the fact that selecting the wrong volume ratio could swallow all you’ve invested within a short period?
Well, you need to be realistic here. How do you expect to have the same money flow with someone whose equity is about 1000% different from yours? For instance you have an equity balance of $100 and should be trading with a micro lot size with a pip increment/decrease of $0.1/-$0.1.
On the contrary, greed surfaced; and you want to be trading in a standard volume ratio. In other words, each positive pip denotes $10 while each negative pip denotes -$10.
Practically, In 10pips you could make 100% of what you’ve invested. At the same time you could lose all you’ve invested in 10 negative pips.
Do you think it’s wise to go on with this ratio?
Can you now see that trading with the wrong ratio standard would either make you or break you within a short period of time?
There is one thing that mustn’t co-exist with you when it comes to forex trading, it’s greed. You have to kill your greed and trade as a business man not a gambler.
#4 Trading without thorough verification.
Evidently, trading without proper verification is also a mistake some of us make without knowing.
When we hear or receive any form of information about the market, we act on it without carefully verifying the efficacy of such information.
Naturally, the forex market is highly volatile, and also an unpredictable type. It can change it’s direction within a twinkle of an eye. Also, it’s a strong reason why you shouldn’t trade the market blindly by relying on information you’ve not verified yourself.
Look, just like Newton’s third law of motion states “for every action, there is an equal and opposite reaction”. Same goes with the forex market, every decision you make has an obvious reaction. You should be careful when making your decisions.
In general, we’ve discussed the common mistakes that holds majority of traders from making reasonable profit from the fx market. Are you still worried about your progress as a trader? I’d advice that you carefully investigate where you’ve been fallen short.