Forex trading is all about planning and maintaining strict discipline. Those who lead their life with luxury are known as the smart investors in the retail trading industry. They never allow their emotions to take a trade on behalf of them. They simply rely on their logic and trading strategy. You need to follow the footstep of the profitable traders to establish your career in the Forex trading industry. Now we will discuss the top five common mistakes made by the novice Forex traders.
Trading with the low-end broker
Selection of the brokerage firms plays a great role in your trading success. You might think you are cutting down your trading cost by choosing the B class broker but do you really think it’s a good way to start. If it was so, the senior traders would never have traded with Saxo. Saxo is one of the most advanced brokers who offers transparency and fast-paced trading environment to its retail clients. So chose your broker very wisely to save your investment.
Trading with emotions
Emotions can be very dangerous in Forex trading profession. Those who are emotional are most likely to blow their accounts. However, if you start trading them market with demo accounts you can easily learn to control your emotions. But controlling your emotions is just a part of this profession. You need to stick to your rules and trade the market with discipline. Being an independent trader you must keep yourself synchronized with the latest market news as it will help you to execute good trades in extreme market conditions.
Counter trend trading
The trend is your friend. You need to have the ability to identify the long-term trend in your trading platform. Start using the daily and weekly time frame as it gives a clearer picture of the market movement. Those who want to trade the lower time frame should learn the use of multiple time frame analysis as it will help you to filter the false trade setup. Being a rookie trader, sticking to the higher time frame data might seem a little bit boring but you must develop this patience to protect your investment.
Following the herd
The rookie traders always think the professional traders have Holy Grail. They even buy signals online and trade with big lots. At times they might have some big winners but considering the long-term scenario, they are bound to lose money. Always remember more than 90% of the traders are losing money. So if you follow the herd in the retail trading business, chances are very high you will lose money. Take your time and try to understand the manual trading system. Start learning the Japanese candlestick pattern as it will help you to trade the major levels. Instead of relying on indicators, focus on the Fibonacci retracement tools as it helps the traders to ride the long-term market trend. Regardless of the quality of your trade setup, never take more than 2% risk in any trade.
Becoming addicted to this profession
Addiction to forex market can cause huge loss. Sadly many new traders become addicted to this market and stare at their trading charts. Even after knowing all the rules of investment they are making the same mistake again and again. They don’t really understand how to stay on the sideline for a long period of time. In order to avoid such addictions, you must stick to your rules and focus on the core factors of discipline. Stop thinking about the low-quality trade setup and focus on daily time frame data. Start spending times with your family members as it will help you to get busy in other sectors. You don’t have to leave your day job to learn to trade. For the first year, consider this profession as an alternative source of income.