A lot of people engage in what is called forex day trading. Unfortunately, this can provide you with a bag of mixed results. In some cases, you may even be losing money in the end. There are many ways which you can lose your money when you engage in day trading. Here are some of the most common mistakes that people do.
Not knowing the risk
It is important that you know the risks that you are going to encounter whenever you are doing day trading. You have to understand that markets can be volatile. It only means that there is a possibility that you could lose a good amount of money even just in one day. If you don’t fully understand the risk involved, it is always a good idea to not go for this. Or perhaps, you can just hire someone to handle your account. However, this doesn’t remove the risks. What it only does is get someone with more experience handle things for you.
Making a decision prior to a news announcement
A common mistake is that people often times make is to have pre-position before even the news is being announced. There are many investors that overlook the fact that markets may behave differently. There are many factors that you should also consider. You will also need to take a closer look at other details that can affect markets in different ways. Therefore, it is not really advised that you consider making a decision before a news has been announced. Though it pays dividends to be first, this might not work all the time.
You may also have to consider the volatility. This means that even before the trend hits, you may have already lost your position.
Trading right after the big news
A lot of people also make the mistake of trading right after the news was made. It is easy to just ride with what majority of people are thinking. However, you have to take a closer look at the big picture. You want to assess the different factors.
Taking a high risk
As a day trader, it is imperative that you don’t risk more than 1% of your entire capital. Why? You will most likely be trading every day. And because of this, losing ten days straight may already wipe out 10% of your total capital. And the next thing you know, you are already halfway towards bankruptcy. Be sure that you are going to just minimize the losses. And even if you had a good day, you also want to secure your profits by taking the necessary precaution.
Despite the mistakes that we have mentioned, there is a chance that you could get some profits when you do forex trading. However, be sure that you consider these things. This way, you can minimize the chances of losing money. Also, you will need to have a realistic expectation when it comes to trading. Given the volatility, you will have to rely on your knowledge of technical analysis most of the time in order to minimize mistakes along the way. Also, you should never be too greedy.