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Beware of common forex trading pitfalls

Sticking to your trading plan will help you avoid many pitfalls, read more here.

Overleveraging Your Forex Account

Overleveraging is when you take out more than the margin available. Even a minor market change can result in you losing your entire forex position due to a lack of margin.

Do not assume that because you can leverage your money 100:1 (or 200:1) it’s a good idea to use the opportunity. Your trades should not be based solely on leverage but instead, trade-specific elements derived from your technical and fundamental analyses.

Forex Trading is Not Adapted.

One common forex error is not adapting your trades to the market.

Markets are constantly evolving, so you must be flexible and able to adjust your strategy. Constantly evaluate the current market condition. Range trading will fail if the market is in a strong uptrend.

Use technical analysis to better understand your trading environment.

You should be informed about current events

Forex markets are affected daily by the current news. Stay up to date with the basics of forex trading.

An announcement about a major economic shift in a country’s currency could ruin an otherwise good trend.

It is important to keep track of any events, dates and announcements. This calendar should be reviewed regularly. Preparation is key.

Forex trading: on the defensive

Forex traders often make the mistake of trading defensively. Trading will always be a losing game. While traders are still on a losing run, they may choose to trade defensively.

You can learn from the bad trades and use new winning strategies.

Realistic expectations are also important. You will never be able to retire on the proceeds of a single foreign exchange transaction. You don’t need to worry about any plan that doesn’t cover your entire profit. Lock them in whenever possible.

You can also read our conclusion.

Forex trading can be a risky business. Keep up with all the recent events and stick to your Forex trading plan.

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