The mistakes are possible in every field and so is the story in the forex market also. If you are trading in the forex trading market then the mistakes are possible and you should be very careful to avoid these mistakes because a small mistake in the forex market may become sufficient to eat up your entire money invested in the forex market. If you are really serious about your forex investment and want to stay away from any possible mistake then you should have the knowledge of the most common mistakes possible in the forex trading activities.
- Most common mistakes in the Forex Trading market
The most common mistakes possible in the forex market are the use of too much leverage, over trading, picking the tops and bottoms and the buying systems of the brokers. If the trader has found a perfect forex brokerage firm where there are no chances of faulty buying systems then the most common possible mistake is of using the too much leverage.
- The use of too much leverage
Leverage is the facility offered by the brokers to the traders and according to this feature, the traders can trade in the forex trading market and the value of their trade could be much larger than their total investment. This is taken as an advantage by many traders and some traders also see it as the disadvantage. If a trader has only $1000 in his account then he can open a position of $100,000. This can work in the positive way if the value of the opened position rises up but if the value goes down then the situation becomes worse for the trader and the trader may lose his entire investment.
- How the use of too much leverage works in the positive and negative ways
The trader has opened a position that has the value 100 times more than his investment so if the value rises to only 2% then the profit of the trader will be 100%. It means that his investment was $1000, he has opened the position of $100,000 and the value of the position goes to $102,000 so after returning the brokers money at the time of closing the trade, $2000 is left with the trader in which his profit was $1000 that is the twice of his investment. Similarly his lose could also be 100% if the value of the opened position goes down in the same way. So to avoid such a mistake in your Forex Trading , the trader should always control the use of leverage. By controlling the use of too much leverage, the trader will limit his profit but the good thing is that he will also limit his possible loss.