Trading forex can be profitable. If you are a Singaporean, perhaps you are contemplating venturing in the foreign exchange market which is currently thriving in the City-State. However, you need to understand which trading mistakes to evade.
It is hard to believe that even professional traders in Singapore make trading mistakes sometimes. Here are some of them and ways to help you avoid them.
Trading Without Learning
Since trading is portrayed as a fast and easy way of making money online, many people who attempt it do it with the aim of making colossal amount quickly. Many times, they will hardly take time to research, learn, or even read extensively about the foreign exchange markets.
As a result, they make trading decisions without prior understanding of their undertakings and end up losing their first investment within a short time. You need to understand that as much as trading can be profitable, it comes with pros and cons.
In order to avoid falling victim to this mistake, research extensively by reading educational articles and books, talking to mentors, watching videos, and practicing using a demo account. It does not have to take you a long time before you understand the basics, and even if it does, it is better to be safe than to lose huge amounts of money.
Remember, trading strategies keep on changing. You, therefore, have to keep on researching consistently to keep yourself abreast with any new trends in the forex trading world.
Risk Management Negligence
Regardless of the magnitude of analysis and research traders do, they are likely to face some risks here and there. This is where risk management becomes necessary as it limits the loss in the event a trader moves in the wrong direction.
You could manage losses appropriately by risking a small amount from your account for each trade you execute. According to experts, novice traders should risk less than 3% of their cumulative account for each trade. They can increase the amount as they get used to trading and understand the market better.
Failing to Conduct Market Analysis
Opening a trade is easy and many times novice traders will open them with no prior market analysis. Many times, specific exchange traded funds trending prices will determine their decisions and this can be misleading. While some traders can be lucky to make some money, this is a risky strategy which can be quite costly.
Greed is one of the main reasons why traders fail. Many times, traders launch trades and place a take profit. Once the trade starts swinging in the right direction, the trader is likely to increase the take profit with the intention of increasing their earnings from the trade.
While sometimes the trader could make their intended money, other times it could decline, resulting in huge losses. Being disciplined and principled in terms of the maximum loss you are comfortable with and the amount of money you intend to make from each trade can save you from incurring losses.
Trading Various Assets
Some traders trade various financial assets. Rather than doing this, they should choose to trade minimal assets per day. Some of the most successful traders deal with less than five assets. Trading a minimal number of assets helps traders to understand them and gain more experience in assets.
This way, they can foretell the direction the assets will move.
Overtrading is another common mistake among many traders especially once they achieve some success. Of course, some of them have made colossal amounts of money from opening multiple trades per day, while others have succeeded by opening minimal trades. Remember, the more trades you open, the higher your risk.
According to experts in the foreign exchange market, novice traders should open minimal trades per day. You could start with one and increase as you go along. Additionally, decide which time of the day is ideal for you. Some traders prefer day trading while others are comfortable trading at night.
As you start your trading career, you will experience various challenges. However, if you take heed of the above-discussed mistakes, you will increase your chances of succeeding.