Top Forex Trading Mistakes

top forex trading mistakesForex trading, or trading in the foreign currency market, is a popular way for beginning investors to make money. Although the potential returns in Forex trading are substantial, many inexperienced traders make errors that result in losing their investment. Here are NUMBER common mistakes to avoid.

Too Much Leverage: Forex trading is an excellent market for investors with limited capital because it allows for trading on margin. Using a relatively small account to make very large investments has its advantages, but it’s easy to overuse. Making a big trade with a small account balance is a bad idea because if the market moves against you at all, your losses become huge. Beginning traders often panic, close out their trades at big losses and end up out of the market.

Over Trading: Related to using too much leverage, over trading is simply making too many trades. New traders often come into the market overexcited and jump all over opportunities that aren’t actually there. It is also very easy to over trade after making one or two winning trades and becoming overconfident. This usually results in a succession of small losing trades that eat away at your account balance, not to mention money lost on commissions.

Tops and Bottoms: Many ambitious traders try to pick the exact turning point where a currency pair will reverse direction. Although turning points are theoretically the very best places to trade, in practice even experts have great difficulty finding those exact spots. Holding out for the tops and bottoms can lead to missed opportunities and significant losses.

Not Using Stop Orders: While no one wants to take a loss on a Forex trade, stop-loss orders can and will save you when the market moves against you. Although stop-loss placement is a complex issue, as a rule not using such an order at all is a very, very bad idea. Use stop orders, and use them the right way to protect your investment. Don’t place them too close, but have them close enough to avoid huge losses.

Trading as a Hobby: All hobbies have one thing in common: They cost money. If you treat your Forex trading as a hobby, you will lost money. The most successful traders treat what they do as a business. They keep records, have a written business plan and record all of their information in a trading journal. If you don’t do that, you have no hope of achieving consistent returns.

Failure to Plan: As the old saying goes, if you fail to plan, you plan to fail. This applies in just about any field, but it’s particularly relevant in Forex trading because emotions play so heavily into a trader’s decisions. Every trader is vulnerable to making the mistakes listed above, but with a good, effective trading plan you can eliminate most of those mistakes. Write your trading plan down, stick with it, and your trading should be profitable.

For help creating your plan, contact be sure to contact the professionals of Lucror FX  today.

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