Forex is also known as the foreign exchange market that has the easiest accessibility. This is why many traders can easily enter the market and start trading. To start a trading career, a business person only needs a computer, an internet connection and some money. Before entering a trade, you should remember that nobody can make profits quickly in this market. Therefore, you must be patient to advance.
Mistakes made by Forex day traders
Forex day traders enter and exit a trade on the same day. People say that you can make a massive sum of money from day trading, which is true but also risky. Day traders make their trades intelligently to avoid a massive crash. However, many day traders make some common mistakes. In this article, we will talk about those common faults.
1. Stop trading if you face multiple losses consecutively
While start trading in the FX market, you should concentrate on two things – i) reward: risk ratio and ii) win rate. The win rate indicates the number of trades a trader has won, and it is expressed in percentage. For instance, if you win 80 trades among 100, then your win rate will be 80%. It is recommended to maintain a win rate of above 50%.
Reward: risk ratio indicates the percentage you are losing or gaining. Reward: risk ratio of >1 indicates that you are making a profit, and <1 indicates that you are facing losses. If the reward: risk ratio is 1, then it indicates that the retailer is neither making a profit nor a loss. Visit here and read some articles about risk management at Saxo. Soon you will be able to take trades like the professionals of the Mena region.
2. Trading without setting stop-loss order
Every Forex day traders should set a stop-loss limit to avoid excessive losses. Stop-loss order will work effectively to close your trade. When the market starts moving against you, the price will go downward, and if you don’t close your trade, you may face more significant loss. So, if you set a stop-loss order , then the trade will be closed automatically if the price reaches the stop-loss limit value. This is a risk management strategy, and it saves a retailer from losing too much money.
3. Taking greater risk than you can tolerate
Many traders prefer taking a greater risk because they believe that without taking greater risk, they won’t earn money. This is another risk management technique that should be followed by newbie traders. Retailers should always take risks of less than 1% of their capital. For example, if you have $1000 in your trading account, then you should take $10 as the risk. Using a 1% risk will also help you to set the stop-loss limit because when the risk starts exceeding 1% value, your trade will be closed. Therefore, if a trader loses several trades consecutively, he will lose only 1% of his entire capital in each trade. It is a safe way to trade.
4. Selecting a wrong broker
New Forex day traders make a notable mistake by choosing the wrong broker. There are hundreds of brokers in the online market, and many of them are scams or fake. So, while choosing an FX broker, experts advise checking their previous histories and performances. In addition to this, some brokers don’t want to provide useful tools even after receiving funds.
While choosing a broker, a newbie trader should take his time. It is a five-step procedure to help you decide whether to work with a broker or not. Look at the offerings of the broker. Don’t accept the random offers of bonuses.
5. Trading based on only Fundamental analysis
This is one of the biggest mistakes Forex day traders make. Without conducting solid research, the day retailers jump to trade based on only the fundamental analysis, which indicates the economic condition of a country, the unemployment rate, interest rate, GDP, market volatility, and so on. Instead of trading based on this data alone, a retailer should also do technical research and analysis.
These are the five most common mistakes made by the Forex day traders.