Computers and machines can do work with 100% accuracy. They don’t have to improvise since they follow strict sets of rules which often known as common. But human beings are more prone to making mistakes since they have emotions. Emotions convince them to make mistakes which can be avoided by thinking rationally. And every mistake that we make comes with a cost. As a trader, you have to understand the gravity of this article. This article is dedicated to the traders are who are having trouble to protect their capital. They are doing the same thing in the wrong way and losing money. So, what the most dangerous mistakes in trading. Though there are many kinds of mistakes in this article, we will discuss the top 5 mistakes which can cost your entire investment. These are –
- Executing too many trades
- Going to deep
- Focusing on short term gains
- Ignoring the demo account
- Losing the temper
Executing too many trades
The execution process is fairly easy in the Forex market. Just with a single click, you open the order and start making money. But to make a profit, you have to predict the price movement accurately. If you fail to predict the price movement, you are not going to succeed at trading. Most of the time, traders place too many trades with the hope that it will make them rich. But soon they lose their entire investment and blame the market. This problem is referred to as overtrading. To avoid the problem of overtrading, you can focus on the major pair trading strategy. Ignore the cross pairs and other markets to narrow down your options.
Going to deep
The intermediate traders often try to dig too deep. They start using tons of variables to analyze the CFD market. But without following basic codes and simple logic, no one can make a profit. If you go too deep, you will never find synchronized signals. This is one of the major causes for which the retail traders are losing money. But does that mean you won’t learn from scratch? Going too deep refers to the creation of a complicated trading strategy. Those who rely on the complex trading system always lose money since they don’t know the perfect way to place the trades. You have to realize the fact, trading is all about simplicity.
Focusing on short term gains
The Aussie traders are biased with short term profit. They are placing random trades with the hope to change their life. In fact, they trade the 1-minute time frame major chart pattern trading strategy. By doing so they increase the risk factors to a great extent and eventually blow up the account. You are here to make a profit. This doesn’t mean, you will be dealing with an aggressive trading strategy. Try to develop a conservative trading technique as it is one of the most effective ways to develop your skills.
Ignoring the demo account
If you bypass the demo account, you won’t be able to learn the true art of trading. It takes years of practice to develop your skills. So, you must practice in the demo platform and keep your investment safe. Sadly the new investors start with the real money. Within a few months, they lose their entire investment. To save yourself from such a situation, you must demo trade Forex.
Losing the temper
Losing the temper is one of the key reason for which the naïve traders fails to recover the loss. They increase the volume with the hope to recover the loss from a single trade. Though it might work most of the time the traders end up with big losing orders. Try to use the concept of risk-reward ratio rather than using a big lot. Once you get used to 1:4+ RR (risk to reward ratio) concept, you will be able to make money even after losing most of the trades.