There are several blunders that can lead to the loss of one’s capital. In this short article, here are three of the most reputable ones, which often concern beginners.
1- Disregard economic announcements
Neglecting or not knowing the Forex economic calendar can lead the trader to fatal errors that will take a while to understand, or worse, will be repeated over and over again. Here is an example using the ForexFactory calendar:
On the background above, it is possible to view past and future information. The information with a red flag is the information that is likely to move the market the most when it is published. It is therefore highly recommended not to initiate trading before this news. On the other hand, depending on the outgoing figure, we can consider whether or not to enter the market, in a way that is anything but risky. Traders who are unaware of this reality suddenly see their account emptied without knowing why. It is possible, depending on market movements, to lose all one’s capital in a few minutes..
2- Do not set Stop Loss
Initiating a trade without placing a Stop Loss, i.e. a limit price level if the price moves in the opposite direction to our position, is also a way to lose your entire capital. Depending on the trader’s strategy, the stop loss will be placed at a certain distance from the entry of the trade and will limit the losses if the trade goes wrong. However, a stop loss should not be placed too close to the point of entry into the trade in order to allow prices to fluctuate.
3- Suddenly entering a price movement
A fatal mistake for beginners is to enter the market when they see prices suddenly rise or fall on their platform chart. Entering the market without knowing the reason for such a move is very dangerous, as there is no guarantee that the price won’t go back up in the next few seconds to “retrace” back to its starting point. Some people lose fortunes by doing so, both on currencies and stocks.
To avoid this kind of configuration, here’s how to react:
- always know why a money price suddenly moves up or down;
- do not enter a trend that has already started but wait for the next trend reversal signal ;
- stick to a well thought-out trading strategy tested in a demo account;
- control his emotions and temptations to trade at all costs.
Conclusion:
In trading, knowledge, discipline, strategy, psychology and self-control are aspects that need to be worked on and constantly improved in order to avoid the worst situation that any trader has to face: the total loss of his capital.