A complicated endeavor like Forex trading never gets stops casing participants in the markets from committing mistakes. If anyone looks deep into the winning and losing ratio of all those who join the market in a year, he will see the demonstration of that fact. Around 15-20% of traders who sign up for the Forex market avoid making some of these mistakes.
Deadly mistakes Committed by the Forex Traders
Many of such mistakes are self-induced by the investors, and so, these mistakes are termed as self-sabotage. Because after experiencing the consequences of those fatal failures, they have no one but themselves to blame for making mistakes.
Without further ado, let’s learn some of the lethal mistakes that can end your career.
- Overconfidence
This is one of the crucial reasons traders, especially newcomers, lose their account balances before they manage to make money consistently. They feel that they already have an idea of what they are dealing with. It generally comes from one’s blind and inflated belief in one’s own cognitive skill and trading ability.
They think the overall concept of Forex trading is easy, and they can handle anything that comes up in the process of making a big amount. You can make the trading process easier but for that you need to work hard. You need to know about optimal trading conditions. Learn this here and get a professional account from Saxo to start your career.
Traders in the United Kingdom should not be unconfident. Because confidence will make them stay in the process and help them to fight their fears and confusion. However, it never means that they should overlook the consequences of failure and potential risk entitled to trade.
- Overtrading
Overtrading is all about making repetitive attempts frequently in order to earn extra money. Overtrading is, in large part, similar to overconfidence. Many think of them as cause and effect, though. Most time, out of his overconfident, a trader overtrades. In both cases, he overlooks a potential risk and takes part in trade without calculating the loss amount he might have to count if situations take an opposite lead.
One can identify whether he is overtrading or not just by judging some definite factors. Like he can justify his reason for placing an order. If he finds out that he is just placing orders to compensate for a past failure or to maximize a past win, he should know he is overtrading.
No matter how big the loss was or how profitable the win was, you cannot just place an order blindly and relying only on luck. Whether it is revenge trading or reward trading, if it is being dealt with little or without caution, it should be averted.
- Overleveraging
Unlike all other exchange markets, Forex provides traders a unique instrument to deploy to buy a reasonable position in the market with a very short amount of capital. This instrument is called leverage.
By using leverage, a trader can buy even fifty times more than the amount he invested would normally cover and receive gains against that bought position. But it has a bad consequence too. If the trend takes a reverse or something unexpected happens, he has to compensate for the lost amount against the giant bought size.
It’s not necessary to mention that it can eliminate your existence on the Forex market. So, while using huge leverage, traders and investors must be certain of the upcoming market movement.
- Over Exposure
Many traders like to engage in multiple position trading. However, the mistake they commit is that they choose two currency pairs which represent two completely different regions and economy of the world. Thus, their experienced risk exposure gets higher than their tolerating capacity.
Some currency pairs have a similar market system and follow identical paths. So, they should not be handled together. Instead, a wise trader should pick one of them. With multi-position trading, traders may think that they are diluting their net amount of risk.
But most currency pairs move in a similar way and thus, they technically pose double the risk.