There are a lot of reasons why the general traders lose their money in forex.
especially beginners in the field of Forex, and the knowledge about of these errors in trading is the first step to reach the path of success.
Trading in global Market financial markets, such as Forex or equities, may be a source of profit for many traders,
but the majority, especially novices, quickly lose their money because they make trading mistakes that leave them at a fast pace, giving way to more efficient traders.
There are many reasons for losing traders, here are the top 5 mistakes:
1: LACK OF PREPAREDNESS
Many novice traders open a real account and begin trading real money in the market simply because they read some articles on the Internet believing that they have understood how to make profits and become rich in a short time.
Successful trading in any financial market is like the success of any other profession. It takes time and effort to learn and understand how markets and factors can affect price trends.
You can read in detail risk management from here: THE BEST RISK MANAGEMENT.
2 – TEST THE TRADING STRATEGY
Each successful trader follows a specific strategy dictating when he can enter into the deal, the risk ratio, and the time to exit the deal.
In order to build a successful trading strategy you should try the ideas you would like to rely on in your strategy before you start trading real money.
Because trading with real money based on an untested strategy may result in a loss of capital. Many trading platforms now offer many tools ranging from simple to complex to test trading strategies in different markets based on historical price data.
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3. NON-PROTECTION OF CAPITAL
A common mistake that many traders make is to underestimate the importance of capital protection, one of the things that makes many traders lose their money quickly.
These traders are quick to enter into trades without having to assess the risks that these deals may contain and the losses that their portfolio may incur. As Warren Buffett says, “The two most important bases for success in investing are: the first rule, not losing, the second rule, not forgetting the first rule!”
You should diversify your portfolio on multiple assets to minimize risk exposure and use stop loss orders to minimize losses.
4. REVERSE TRADING
Emerging traders often try to predict a reversal of the trend simply because the price has moved for a long time in a certain direction.
So they buy when the asset has known a big drop on the basis that the price has reached its lowest level, and selling when the asset has known a large rise on the basis that the price has reached its highest level, a common mistake committed by many traders.
Therefore, you should know that the probability of continuing the trend in the market is always greater than the probability of its reversal, so the trader should not attempt to predict proactively future trends and always trade with the trend.
5. NON-FOLLOW-UP OF GLOBAL EVENTS
In order to increase your chances of success in trading you have to be following the global events, whether economic or political, as different markets are heavily influenced by global events.
With each event, you should expect the assets or sectors that may benefit from these events and which assets or sectors may be adversely affected.
Understanding how markets are impacted by events will make you expect major market trends and thus look for low risk entry areas and enter the overall trend.
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