Common Mistakes of Forex Traders to Avoid
From collateral to time management and sticking to one way of trading, these mistakes of forex traders should be avoided while investing.
Trading with only one currency
Forex traders often prefer their country’s own currency in the positions they open. There is no time zone difference, and other factors such as news or data can be followed easily. When instruments in different time zones are preferred, traders can’t keep track of the data released during the day. You may face a big surprise when you wake up in the morning. However, this may limit your scope of trading. Try to avoid trading based on only one currency and expand your portfolio to become more active in the Forex market.
Lacking collateral management
The second most common mistake could be a lack of attention to collateral. Traders should consider their collateral before opening a position. If you open a position on an instrument that has high volatility and a large lot size, a tiny movement against your will may end up as a “margin call’. So, try to learn the average volatility of an instrument before opening a position.
Trading with only one instrument
Similar to sticking to trading with only one currency, many traders stick to one instrument. They trade only one instrument, or most of their trades only include one instrument. On one aspect, this might be considered a ‘true strategy’ by some experts. It minimizes your risk compared to trading many instruments. However, this move increases your opportunity cost. You will miss opportunities to gain profit on other instruments. In addition, trading multiple instruments can eliminate the risk of losing by hedging another instrument. For example, if you open a position in the EURUSD currency pair and suffer losses, you can open a position in gold or silver and minimize your risk.
Time management issues
Many traders are not good at arranging their time. Managing your time wisely is key to success and to the forex world. You should also follow data releases and take action accordingly.
Take a look at the related article 11 Mistakes Made in Trading
