Do you dream of becoming a stellar Forex trader? With sufficient determination, this is not impossible. It is worth learning about the most common rookie mistakes. What sets professionals apart from novices? Here are the key traits and skills of an experienced trader in Nigeria.
Forex is inherently risky. There is no way to make trading absolutely safe, as the market may always go against you. Professionals know how to keep their losses under control. They develop solid risk management strategies and follow them faithfully.
First, they never forget to set stop loss and take profit for every single position. These features allow you to have trades executed automatically at acceptable levels. Even if you fail, you never lose more than you can afford.
Another important aspect is your risk per trade. Newbies can put a large chunk of their balance at stake at once. Professionals, on the other hand, set reasonable limits. Many experts follow the so-called 1-percent rule. It means that you should risk no more than 1% of your capital on each trade. For instance, if you have $50,000 in total, the acceptable risk level is calculated at $500.
Finally, it is crucial to know how to use leverage. Trading on margin sounds appealing. A trusted broker like ForexTime can increase your buying power for free. At the same time, the risks are also ramped up, and you can wipe out your balance in seconds. CFDs, for example, are notorious for their highly leveraged nature. Remember, higher profits always come with higher risks. Learn as much as possible about risk in fx trading today.
Diversification is another way to hedge risks. As traders gain experience, they explore new financial instruments. The more different assets are in your basket – the lower the overall risks. Never put all of your eggs in one basket, as the saying goes. When you rely on a single instrument, such as a currency pair, you expose yourself to higher risks.
Suppose you have several currency pairs, a few stocks, and a few derivatives in your selection. If your currency-related decisions fail, you may cover those losses with profits from equity. This minimizes the damage, and, in some cases, neutralizes it. A diverse portfolio provides balance, which is crucial for a steady income.
Forex novices may think of diaries as something redundant. This is a common misconception. A trading journal is an important tool for any serious trader. It allows you to review your own performance and better your strategy.
Note down all important parameters of each position, such as the entry and exit price, size of leverage, market situation, and your motivation. This way, when a mistake occurs, you can assess your own results and identify areas for improvement.
You may be surprised, but even feelings matter. Traders should never work when they are angry, depressed, or overjoyed. They need to make sure their decisions are purely rational. Trading psychology is a subject worth learning about. Emotions cloud our judgment, so when you feel that a trade is motivated by feelings, stop.
Professionals do not try to eliminate mistakes altogether. Instead, they make them as rare as possible. This should be your ultimate goal.
Forex does not accept perfectionism. Mistakes can and will happen, however skillful you are. The market forces are always beyond your control. What you can do is make your risks manageable, and losses infrequent.
Every blunder is an opportunity to improve your strategy. When faced with a loss, stop. Instead of chasing it, look back at your methods. Identify what went wrong. If you keep taking the same steps, you will have the same mistakes over and over again.
Seasoned traders follow consistent strategies and never stop perfecting their techniques. They control their emotions, so momentary changes in the market do not affect their decisions. The ability to think ahead is especially important for long-term strategies. When you think in terms of several days or weeks, you should not be bothered by minor ups and downs. Rookies, on the other hand, feel the urge to react to the slightest changes.
Talented traders never stop learning. They understand that without perpetual development, they are doomed. Even jaw-dropping results do not mean you may get set in your ways. The global market is always changing, and you should be mentally agile to keep up with it.
Overconfidence and arrogance are common causes of spectacular Forex blunders. Nobody is infallible, even distinguished experts. Do not be lazy. Keep your eyes and mind open and always learn from the best.