A day trader places short and long orders to capitalize on intraday market price action resulting from temporary supply and demand disorganizations. Hence, such kind of trading is also termed as intraday trading that order must be settled within 24 hours. Since time is very limited, therefore, there must be extensive analysis before placing such orders and most of the traders could not follow vital trading discipline. Despite immense training and information, trader’s make trading faultless which are essential to be dodged. Likewise, this blog will furnish the 5 major mistakes that need to be avoided in FX trading.
1.No Proper Trade Plan
This is the most common mistake performed by novice traders and they take it very lightly until they face the losses. Trading in forex should be taken as business and for every business, there must be short term, long term and risk avoidance blueprint and traders are advised to make a proper plan before executing the day order. They must have a format to follow the step-by-step pro forma that includes entry price triggered criteria, exit price criteria, duration of trade and supporting reason as well. Failing to plan is planning to fail holds true in the forex dimension.
2.Lack of Risk Management
After the execution of an order, traders must be ready with a risk aversion strategy which is equally indispensable to place an order. There are various risk mitigation tools available to implement during the trading session such as Stop Loss, Take Profit, Training TP/SL, Risk & Reward ratio, position sizing, free margin amount, auto trade management. This is observed that most of the traders are missing risk management in live trade which may lead to the odd situation. Risk should be pre-calculated, pre-specified and organized in a planned system to apply at the right time. Smart traders never scape such an important task in the live trading scenario.
3.Illogical Analytics
Trader uses unrequired technical tools which actually do not support their trades but confuses and hence the wrong decision. These kind of mistakes are very common among day-traders. Therefore, traders should know the exact tools to be implemented which provide the accurate information rather than just the bulk of information. For instance, if we want to find the Stop Loss point then we can use Average True Range (ATR) and this tool is more than enough what we require exactly.
4.Emotional Trap
Even experienced traders are confused and spoil their good trading because of the emotional trading trap which always deviates the trader minds. They used to shift calculated Stop Loss or Take Profit point due to emotional trading which forces to change the mindset during running market hours. This is the major cause for the failure of many traders as well.
5.Broker Animus
Last but not least, few traders get lured by Ponzi schemes and false promises of brokers and after such time, such traders develop feelings of cheating despite generating profits or incurring losses because of hidden cost or hidden information. Thus, they need to be very careful and must read all trading instruction as well as the disclaimer.
As per above confab, we can comprehend the major common problems faced by day-traders and we do believe to rectify such errors to have better trades in the coming days.