An investor may get allured to invest his money in Forex trading, but he should not be callous to learn about the basics of this platform. Due to the overgrowing success rate in Forex trading, a great number of investors are coming here to join in this marketplace. Beginners are getting biased by listening to the success stories of the social media influencer in the Forex. But they are not very interested in the study of the basics of the platform. They think if the investment is made, the return on the investment will come easily too.
Based on this bad belief, they involve themselves with bad trades by making some deadly mistakes. Today we will discuss the general mistakes in Forex trading, which can be avoided easily by taking some conscious steps.
Taking high leverage
Leverage is a great tool that may prove very handy if utilized properly. Beginners see the good side of it and are not very careful of the downside of the lucrative tool. Leverage may work as a two-way sword if the trader fails to understand the function.
Generally, a trader may get a 1:10 leverage facility from a broker which means that he may get the power of a $100 investment even if he makes a $10 deposit. The ratio of leverage may vary from broker to broker and on the capability of the regular investment of the traders. But remember, a good broker will never let you trade with insane leverage. Feel free to visit the official site of Saxo, and learn about their leverage trading account. They always provide optimum leverage to ensure the safety of the capital.
When the investor intends to use the leverage, he must be conscious of the fact that he is taking the leverage as a loan from the broker. It indicates that he has to return the money to the broker later even if he faces loss. When the trader makes a huge amount of loss, he fails to return the money, and his account balance goes negative if an adequate amount of deposit is not there. In such a condition, the broker may suspend the privilege to use the trading platform.
Not using a demo account
Without learning about the basics no one can analyze the price movement of a certain asset. In fact, lack of knowledge is one of the common reason for which rookie traders are losing money. It leads them to their doom as they face a great amount of loss without having any in-depth knowledge in trading. Experts know the benefits of the demo, and for this reason, they utilize this to check their action plans if they will work in the real one or not. When they get success by taking the virtual sandbox-like facility of the demo, they implement their lessons on the real one. Newbies should take the path of the professionals, and utilizing demo one must achieve the practical knowledge for the execution of the trades.
Not using a protective stop
Setting a stop-loss point may help greatly to close the trades in a downtrend by taking the heavy loss. An investor must try to set a stop-loss point below the moving average so that he does not have to taste the huge loss. As long as the trader relies on risk management plan, they can trade safely. Losing trades are very common but this should not make an investor frustrated. So, keep using protective stop and trade with low risk in each trade.
In conclusion, it can understand that there are so many mistakes that can be occurred by an amateur trader in the beginning. But, he must be conscious of the general mistakes by educating himself about the basics of FX trading. Try to collect the right data and analysis these correctly for taking better steps.