The global forex market can any day brag about $4 trillion in average daily trading volume, which makes it the largest financial market in the entire world. The popularity of the forex market entices majority of the traders from all over the world, from the novices who are just learning about the ways of the forex market to the seasoned professionals. Since it’s easy to trade the forex market, there’s access to considerable leverage and low costs. With the easy access to leverage, there are more chances of facing risks too. Here are some risks that you can shave off by taking the required steps.
- Averaging down: Most traders often fumble while averaging down. That is not something which they planned to do when they started trading but still most of the traders have ended up with this. There are various issues with averaging down and the main problem is that you have to hold a losing position, not only compromising money but also time. Time and money are precious and they could be placed in something else which proves itself to be at a better position. Averaging down can inevitably lead to a huge loss or a margin call.
- Getting ready before events: Traders are aware of those news events which are going to move the market but they don’t get to know about the direction in advance. A trader might be confident about what a news announcement might be, for example whether or not the Federal Reserve will raise interest rates. You should remember that movements might sometimes be unpredictable and hence you should never pre-position yourself if you want to be a successful trader.
- Trading in the perfect way after the news: As soon as the news headline hits the market, it starts moving aggressively. You would think that this means easy money to grab some pips and hop on board. In case this is done in an untested way, without a plan to back it up, it can be as dangerous as offering a gamble before you even receive the news. Try to avoid this.
- Investing more than 1% of your capital: Don’t ever harbor the idea that by taking excessive risk, you can expect excessive returns. All traders who invest large amounts of capital on single trades are definitely going to lose in the long run. The thumb rule says that any trader should never risk more than 1% of his capital in a trade. All those who are professional traders will risk less than 1% of capital. If you’re a day trader, you deserve giving more attention.
Hence, when you’re thinking of trading the forex market in order to make money, you should avoid taking the above mentioned risks. Keep following the trends so that you don’t make any decision which is beyond the current market trends. For added assistance, you may seek help of the forex brokers like ETX Capital.