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Top Forex Trading Mistakes to Avoid

The forex or foreign exchange market’s low barrier of entry makes it one of the world’s most accessible trading markets for anyone interested. The only thing that you would need is a computer, an internet connection, and a few hundred dollars to start trading for beginners. However, this easy entry is not a promise of profit. In this highly volatile trading market, certain practices can result in a complete loss of capital. It is more of a downside as most people tend to make a run for trading without learning the basics first.

Before you step into the world of forex, consider these common mistakes to avoid, as they are the main reasons most new forex traders fail.

Risking more capital than you can afford

The practice of taking an excessive risk does not often bring in high returns. Almost traders who risk large amounts of capital tend to eventually lose it in the long run. One of the key parts of a clean risk management strategy is to establish the amount of capital that you can risk on each trade. It is recommended by experts that traders should not risk more than 1% of their capital on any single trade.

Trying to anticipate the news

Though most traders will know the possible news events that will move the market, the direction is often unpredictable. Anticipating the direction the pair will move, and taking a position before the news comes out might look like an easy way to make a windfall profit. But, because of the volatility of the market, the price will move in both directions, sharply and quickly, before picking a sustained direction, thus increasing the chances of a loss. For all these reasons, taking a position before a news announcement can reduce the chances of profit in forex.

Unrealistic expectations

Though everyone has some expectations about the market, we cannot expect it to act according to our desires. It simply doesn’t care about individual desires and traders must accept that the market can be volatile and risky. There is no fixed method for profiting from the forex trades. The best way to avoid unrealistic expectations is to formulate a trading plan.

Trading without a plan

A trading plan is a written document that outlines the type of strategies that you will be adopting while opening and closing positions. It defines how, what markets and what time frame you will use for making trades. The plan should also include the risk management rules and how you will enter and exit trades for profit and loss trades.

Risk Warning: This material is considered a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. Trust Capital TC Ltd does not take into account your personal investment objectives or financial situation. Trust Capital TC Ltd makes no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast, or other information supplied by an employee of Trust Capital TC Ltd, a third party or otherwise.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81.48% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Trust Capital TC does not offer Contracts for Difference to residents of certain jurisdictions including the USA, Iran, and North Korea. Please consider our “Risk Disclosure“

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