Trading is the most elite professionals in the world.In recent days, it is becoming more popular due to high leverage account. More people are showing interest in this industry by watching ads where and the life style of a trader. But these ads give them wrong information where they mention that anyone can earn tons of money by just clicking buttons. It is true that anyone can be a trader but becoming a good profitable trader is much harder than it sounds. In the following article, we are going to talk about a few common mistakes that a beginner trader makes.
Lack of preparation
Most of the new traders join this industry with the hope of getting rich quickly and as a result, they don’t give enough time to prepare themselves for the market. Trading is the toughest profession in the world and lack of preparation is one of the key reasons behind the failure of a new Forex trader. This market is so competitive and volatile that even experienced trader often fails to cope up with it. So you must prepare yourself accordingly so that you can cope up with the market change. As a new trader, you can be a fundament trader or technical trader but you must need to prepare yourself daily before starting to trade.
Not using any stop loss
Trading is a risky profession and as a result, every trader should give priority to reduce their risk exposer by following proper risk management rules. But new traders do not think about risk management. The often open trade without any stop loss level and as a result, they lose their trading balance within a months. But many new traders indeed fix a mental stop loss level and they avoid putting them in their trading platform.But due to such approach, they failed to close their trade in the perfect position. Read more about professional options trading approach at Saxo, so that you can minimize the loss at trading by using stop loss at the perfect place.
Using a poor risk-reward ratio
The risk-reward ratio is the ratio between the profit and loss from a signal. Most of the new UK traders do not understand the importance of using a positive risk-reward ratio.They just focus on the winning rate of their trades. But often a trader with a 60% winning rate remains in losses whereas a trader with just a 50% winning rate can be in profit. By using a risk-reward ratio of 1:2 a trader can 3 out of 5 trades and still can be in profit. Because by winning 2 trades they are earning more than what they will lose in 3 trades. To be precise, the risk-reward ratio helps a trader to stay in-game and for having a healthy trading career.
Not using proper lot size
Forex trading is directly related to money. If you want to earn from it, you need to invest some money. We suggest you to fix a certain amount from your trading balance which you can lose. By doing this, it will help you not to get emotional. Based onthe amount that you are ready to lose, fix your trading lot size. But most of the time traders don’t like this idea. They determine their lot size based onemotions. As a result, they often blow their account just by using an insane lot size.
As we said before, most of the new traders join the trading industry to get rich. And for this reason, they increase the risk exposer in every trade. But by opening bigger position, your margin becomes low. When the trade goes against you,it affects the other trades. If the margin drops to a certain level, all of your trades will close automatically. So, never try to open more trade then your account can handle.If you spot a good signal, first close the running trade and then go for the new one.
As a new trader try to avoid these mistakes mentioned in this article. By avoiding these mistakes you are getter one step closer to becoming a successful trader.