Common forex day trading mistakes that you should avoid, no doubt that Forex Market is one of the most accessible global day trading markets thanks to the low barriers to entry. You just need to have a computer, internet connection and also a few hundred of dollars to start a day trading on Forex market. However, just because it seems to be easy to start trading, you don’t need to learn Forex initially.
Learning Forex is important to begin your Forex trading journey. You might be able access the market easily, but making profit on your trading is another thing. There are numerous pitfalls waiting for you there. And you need to know how to deal with them by learning from the trials and errors you face as well as successful traders’ experience.
5 Common Mistakes of Forex Day Trading that You Want to Avoid
One of the most essential things that you need to learn about Forex is the common day trading mistakes that can cost you. When you are aiming to gain profit, avoiding mistakes that can cost you is simply a must. So, what are they? Let’s check out some of the common mistakes to avoid on trading Forex below.
#1 Day Trading with a Poor Reward and Win Rate
There are two things on the trading statistics that you need to watch out: your reward or risk ratio and your win rate. Win rate refers to how many trades you can win which is presented in percentage. For instance, if you win 70 trades out of 100, your win-rate will be 70%. As a day Forex trader, you tend to maintain it above 50%.
On the other hand, your reward/risk ratio refers to how much you succeed in relation to how much you are defeated on an average trade. For instance, if the losing trades are $50 in average while the winning trades are $75, it means that the ratio is $75/50 equal to 1.5. You typically want to maintain the ratio above 1 or ideally above 1.25.
#2 Adding to a Losing Day Trade
This is surely a dangerous practice for a trader because the price is able to move against you longer than you might expect it. The more you add to the position, the bigger price will move against you. That’s why it is a good idea to never place a trade on a losing day trade. It is better for you to place a stop lose.
#3 Deficient in Risk Management for Each Day and Each Trade
Sizing proper position is actually a part of good risk management strategy which all Forex day traders need to own. The initial part of your strategy is to build how much capital you are willing to risk each trade. A day trader ideally risks 1% of less of his capital on one single trade. It means that an order of stop loss close the trade.
#4 Not Researching Your Broker
The foremost step on being a successful trader and avoid lost is by joining a good broker. Your Forex broker will be the one you trust all your money with. If your broker is poorly managed, being in financial problem or just a trading scam, there is no doubt that you will lose your money despite how fine you trade.
#5 Day Trading without a Plan
The last but not least, you need to avoid trading without a plan too. Everything that has been discussed above is needed to be included to your trading plan. Write a documented trading place which outlines how and when you trade every day. Don’t forget to keep learn Forex as you go too since you need more information on creating the best trading plan.