If you have a device, good Internet, a couple of hundred bucks and a desire to make money, then you can start Forex trading. We prepared these tips so that you can learn from the mistakes of other people and won’t repeat them in your future trades.
1. Trading without stop-loss
Stop-loss is a way to limit losses. Every trader should use it to be sure that he can get out without losing more than he expects. For some reason, the price can move against you and stop-loss can help you to limit risks while trading. Thereby, you can go to the next trade.
Depending on your strategy, determine the most suitable level to set stop-loss and always use it when trading on the forex market.
2. Add to a losing day trade
Often traders use stop-loss to prevent “averaging down” and control the risk of possible losses. When you take a position, but it turns against you, you take another one counting on the fact that the price will turn around. Thus, “averaging down” can work against you making the losing position larger.
Advice: do not add to a losing day trade. You can recover a small loss much easier if you trade with your proper position size.
3. Poor profit rate and profit/loss ratio.
If you profit 70 trades out of 100, your profit rate is 70%. Depending on the trades you close profitably, you can count a percentage of your profit rate ratio. Usually, a trader wants to get about 50% of his profit rate.
The loss ratio is actually how much you lose on average. Trading daily, you can easily count your profit/loss ratio by the following formula. Let’s consider that your losing trade is $50, winning trade is $70, thereafter $70/$50=1.4.
The index of 1 is considered to be a normal number for a daily trading. The perfect index is above 1.25 which means that you are already a profitable trader.
4. Predicting the news impact on the market
Economic and Forex news has a high impact on the situation on the market.
Moreover, you should predict how some events impact the price to make a windfall profit. You should even do this before the news release. Very often the spread between bid and ask is much higher so it could be hard to find the liquidity with the appropriate price.
Instead of trying to predict how the market reacts to some news, develop a strategy when you will be able to trade after the news and benefit from high volatility. Thus, you will be able to avoid unknown risks.
5. Choosing a broker you know nothing about
Choosing a forex broker is one of the most important decisions you will make as a trader. You trust your money to this company. Depending on your needs, choose the appropriate type of broker. Pay attention to trading conditions and a possibility of money withdrawal.
JustForex Broker is one of the world leaders. It’s trusted by millions of clients and established in 197 countries. JustForex offers profitable trading conditions and protects its clients from third parties. The company provides an encryption of all stored information to prevent unauthorized access to the data of its clients. JustForex is an officially registered broker which has a regulation of the Belize International Financial Services Commission.
You can open an account and start making money with the broker you can trust – JustForex.
Avoid these mistakes to become a successful trader, calculate your profit/loss and profit rate rations, trade with a trusted broker. Follow these simple rules and trade with a plan.
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