Common Mistakes Made by the CFD Traders

Estimated read time 4 min read

In Forex trading, mistakes are very common among beginners, and they are not even cautious about them. Here, we will mention the most frequent mistakes that newbies make.

Common mistakes of CFD traders

There are a number of trading errors that ruin the efforts of a trader. Let’s see some of those common mistakes.

  • Developing a wrong strategy

Sometimes beginners can’t develop a good strategy for trading purposes because of not having good knowledge. They choose the wrong timeframe and wrong styles. For example, newbies should never choose short-term trading styles like day trading or scalping for dealing purposes because these styles require advanced knowledge about technical analysis and indicators. Therefore, while developing a strategy regarding these issues, the rookies aren’t going to succeed so easily.

  • Making decisions based on emotions

Emotions give birth to greed and fear. Sometimes the newbies can’t resist the temptation of making more money from the industry; as a result, they either enter into overtrading or taking greater risks. Both of these attitudes can lead to the net loss of investments. Similarly, fear arises from frustration. A scared trader in Singapore doesn’t want to place an order because of lacking confidence.

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  • Choosing technical analysis at the beginning

Some beginners think that technical analysis is an effective method to make profits quickly. This is why they want to learn about technical indicators. We are not saying that learning about these indicators is wrong. It is actually a great idea to learn those tools, but not now. It is wise to take time while learning them. If you want to start dealing, it will be better, to begin with, fundamental analysis. Take time and advance slowly. For that, if you require a demo account, get it from here. But never rush in this profession.

  • Not including the risk management plans

Risk or money management processes are essential to developing a concrete strategy in this industry. Some of the vital plans are – analyzing the risk to reward ratio, setting up the stop-loss limit, reducing the position size, decreasing the risk tolerance limit, etc. Each of these plans has a unique advantage and attribute. For example, the risk to reward ratio indicates the probability of making profits or facing losses, and the stop-loss limit cuts off the deal whenever there is a recession in the market, position size indicates that the amount of profit or loss the investor wishes to face per pip movement. Neglecting these techniques can destroy your investment within a few deals.

  • Choosing a larger position or lot size

Position size, lot size, volume size, and trade size are similar. It is the kind of risk that you want to take while placing the order. When an individual places the lot value of 0.001, it indicates that he may win $10 or lose $10 based on the price’s movement in every single pip. If a user increases the lot value of 0.01, the risk will be multiplied by 10. Many newbies increase this position in the hope of making more money.

  • Choosing the wrong broker

This is another crucial mistake that the novices often make. While choosing a broker, they run after those who offer random bonuses. Remember that everybody should choose the Forex broker carefully, and while choosing this, check the following – provided security, spread or commission fee, customer services, response time and a hassle-free withdrawal process.

  • Not using the demo account

Many newbies don’t want to use the demo account to increase their knowledge and experience level. A demo account is a place where novices can evaluate their knowledge and skills for free. You don’t have to invest money here. In the case of a modified strategy, a newbie can easily check the efficacy of the new strategy. Even if he learns a new indicator, he can utilize the demo account to realize how to use that tool and when to use it.

These are the common mistakes made by Forex newbies.

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