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Blunders That Inexperienced Forex Traders Commit

by Verimont MacPhire

Forex trading can be an exciting way to earn extra cash. Then again, if you're not cautious, it can also result in large financial losses. To prevent this from happening to you, here are a few of the common mistakes that people make when trading in the currency market.

Believing it is a get-rich-quick venture

Many people believe that trading in the currency market is a get-rich-quick venture and open an account without taking into consideration the risks and effort that must be dedicated to realize such. If you're thinking about trading in the Forex market, you should treat it as a career which requires time and patience to master. Not only do you need to learn about your preferred currency pair, you also need to familiarize yourself with fundamental and technical analysis principles; create a proper trading and money management plan; and develop, try, and fine-tune trading methods before you can experience consistent but not always substantial earnings. You also have to keep an eye on your positions and stay up to date with market developments.

Allowing emotions to override logic

Traders ought to know when to open and close their position. Deciding on these in advance will prevent you from second guessing and letting your emotions override logic. Two strong emotions that traders have to deal with are fear and greed. Fear will prevent you from making a trade when there is a favorable opportunity and it can also make you close a position before it has the chance to become lucrative. Greed can push you to make risky trades in an effort to gain a lot of money, which in many instances, turns to considerable losses. Using stop orders can help you secure profits and reduce your risks effectively. Revenge trading can also erode your earnings quickly.

Don't have a money management plan in place

What sets experienced traders from novices is that the former knows how to manage their money. For instance, they hardly ever risk more than 1% of their overall capital on any single trade. Using this method, you are guaranteed that no single trade or single day of trading erodes your account considerably.

Excessive use of leverage

In Forex, leverage is not only available, it is also provided in bountiful amounts. However, trading at a margin is a double edged sword, that is, it can increase your earning potential but can also wipe out a big chunk or all of your initial investment..



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New Unique Article!

Title: Blunders That Inexperienced Forex Traders Commit
Author: Verimont MacPhire
Email: greatmarketingpackages@gmail.com
Keywords: Business,Finances,Sales
Word Count: 409
Category: Sales
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