Forex has become very popular, and investors around the world are taking part in the CFD trading business. Though we have a large number of retail traders, the success rate is not that high. Most of them are newbies who have no experience in the marketplace. Some of them are becoming gainers by avoiding mistakes during the execution of the trades. Today, we will discuss the mistakes in the Forex market, which are performed by the rookies in the beginning. We aim to make you enlighten so that you do not get trapped by making any of these mistakes.
Selection of the broker
A retail trader cannot open a demo account on his own. To get access to the investment industry the trader must take the help from reputed broker. Though choosing a broker may seem easy for beginners in the beginning, but in reality, it is not. An investor must check the necessary legal documents of the brokers by visiting their professional websites. He may check these by going to the footer section of the website, where necessary documents are generally displayed. Generally, a broker gets his membership and licenses from the NFL or FCA. Beginners do not check the licenses of the brokers, which makes them suffer in the long run.
Leverage associated with the account
Leverage is a great tool that helps an investor to make a high investment in the lowest deposit. But, this handy tool may work as a two-way sword as taking so much leverage may increase the risk to a great extent. Check this here and learn more about the optimum leverage offered by the quality broker.
Generally, from a broker, a trader gets a 1:10 leverage option, which indicates that the trader may get $100 of investment facility with the leverage power even if he deposits only $10. But, the opportunity may vary based on the ability of the brokers and the deposit of the traders.
Newbies take a huge amount of leverage, which increases the risk greatly. If they face a huge loss, their account balance can be zero, and they have to close the trading account abruptly. To solve this type of issue, an investor must keep in mind that leverage works as a loan from the broker, and a trader must return the money whether he makes profit or loss.
Setting up a stop-loss point helps the traders by protecting them from big losses. A trader must set this little bit lower from the moving average or according to his planned limit so that he does not have to lose enough money. But few greenhorns continuously change the placement of the point with the downtrend. This type of incident may lead the trading account to be closed sooner by making the account balance zero.
Stop-loss point also helps to save the time of a trader and make him free to stay in front of the laptop always to make important decisions. It works as the lifeguard for the financial instruments, and if a trader does not set that, he is going to take nothing but a suicidal attempt.
Take a profit point helps to automate the trading system by setting a goal for the profit. When the desired goal is achieved, an investor’s trade will be closed automatically. Because of greed, few of the traders do not bother to set a stop-loss order, which makes them deprived of the facility of automation.
To the bottom line, it can be said that to be a successful investor in the Forex market, one must be conscious enough to avoid the common pitfalls. If he becomes unable to meet the challenges by solving all the problems, CFD traidng is not for him. But, do not be depressed. You will get many chances. So, just wait for the right time.