Don’t Get Hit! These are 5 Dangerous Traps When Trading

This means that the trader is also required to learn more. At this point, the more you learn doesn’t mean you have to make more mistakes. Although in practice, there are still many traders who stumble upon the mistakes they make.

5 Dangerous Traps When Trading

However, in this article we are going to discuss 5 pitfalls in forex trading that you should watch out for.

Downsizing trading plan

Not all traders have a trading plan when buying and selling stocks or forex. Most of these traders will usually buy or sell carelessly based on sentiment. Moreover, it is safe to guess that they are not among the 5% of successful traders.

As you know, successful traders often make their trading systems organized and planned. This of course applies to all traders, be it trading forex, stocks, gold, etc.

Setting targets ahead of time and knowing when to exit a trade is an important part of successful forex trading. A trading plan or trading plan is one of the essential components in forex and commodity trading. With a trading plan, you can trade in a more focused, targeted and disciplined way.

Forget about risk control

As you know, forex trading is an investment that contains high risks. Although risk in forex cannot be eliminated, that does not mean that it cannot be controlled. When starting trading, many people focus on how to make the most profit from the market. Unfortunately, not many people study risk management or risk management.

Many traders, especially beginners, do not understand the importance of the concept of risk management in forex trading. In fact, professional traders have said that risk management is one of the main keys to their success. The importance of risk management in forex trading is widely used to get you on the road to success. Efforts to anticipate losses in playing forex must be planned with careful preparation.

Neglecting to apply a stop loss

The Stop Loss feature is a menu provided to assist traders in managing their forex trading business. This feature is very useful indeed, especially in minimizing losses if the specified currency exchange rate exceeds the lowest price limit.

Reducing risk is crucial and a must have for traders who do not want to run out of their trading capital in just one trade. As it is well known, there is an unavoidable fact in Forex trading, and that is that the price of the Forex market is difficult to predict. Therefore, it is very important to use a risk management tool such as a stop loss.

Reducing margins

The term margin in forex trading can simply be interpreted as the trading capital used in opening each transaction/entry. Margin can also be interpreted as the money you guarantee to open transactions in a certain number of contracts. The larger the lot size you use, the higher the margin required. On the contrary, the smaller the lot you use, the smaller the margin required.

However, in forex trading there is also the term free margin. Although the words are almost the same, in practice, there is a big difference between margin and free margin. Free margin in forex trading is defined as the money that is not used in transactions (money that has not been debited with margin).

Ignore money management

There is one important note in forex trading, and that is that no matter how good a strategy is, it will not be useful if you as a trader do not apply good money management. For this reason, a good understanding of money management is important for controlling financial conditions when faced with threats and being able to find success when opportunities arise.

In its concept, the term money management in forex trading is explained as the management of money in the trading account that you make. This includes the number of lots in each trading position, what is the distance between the entry price (open position), stop loss (SL) and profit target you choose, as well as the maximum number of trading positions you will open at once.