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Forex or simply FX, otherwise known as the foreign exchange market is a preferred choice of investment for many people. Trading with currency pairs using the right strategy can yield a significant return on investment (ROI), especially in short-term periods. That’s why there are well over $5 trillion of currencies being traded in the FX market every day.
What’s great about forex is that anyone can invest. If you use reliable sources, if you use reliable forex brokers, such as Hotforex Nigeria, you can start trading right away. The important thing is to avoid rookie mistakes that have the potential to ruin your financial status. With that in mind, here are a few forex trading mistakes to avoid.
Trading without any practice
Every forex trader needs practice every now and then. This is especially true for the beginners. However, even experienced traders practice from time to time so that they can test out different strategies.
The fact of the matter is that you can always use a demo account. Demo accounts are provided by your brokers and they are basically a simulation of the real-time trade. You don’t have to spend real money on demo accounts and you can practice trade strategies and other tactics.
Trading without a plan
Every currency trade requires a good plan. Without a plan, you’re basically going in blind. A trading plan outlines optimal strategies that work out best in specific market conditions. That said, 95% of rookie trades manage to fail at their first trade attempt.
They believe that they can multiply their investment on a single trade. The fact of the matter is that you cannot successfully predict the outcome of the trade. That’s why you need a plan that will help you develop an exit strategy and allow you to mitigate your losses.
Relying on speculations and random news
Information flows everywhere you go, including the forex market. However, that doesn’t mean you should listen closely to everything you hear. Economic statuses and current state of affairs in various countries may affect currency pairs you trade with.
That being said, day trading isn’t affected by the fundamental points of view. Your trading plan and strategies and your trading plan should give you an advantage. Relying on news and speculations of others will hurt your investments. The main reason is that you shouldn’t divert from your original strategies because you heard a rumor.
Closing Words
Forex trading can be quite complex to figure out. However once you figure it out, you can actually devise a strategy that will allow you to gain profits on both short-term and long-term investments.