“It’s a gold rush – only the miners don’t know which hill to mine.”
If a currency trader could go back in time and give advice to their younger self, it would be something along these lines. Trading currency is a highly competitive market, both locally and internationally. For you as a new currency trader in Singapore(visit website here for more info) not to lose money on common mistakes, here are eight of the most common pitfalls that FX traders fall into when they first start:
Allocating too much money into the market
It is one of the most common mistakes made by new currency traders. A trader’s capital can be compared to a muscle in that you need to allow it time to strengthen before pushing it to its limits. As with weight training, new traders are better off allocating only a small portion of their starting capital into the market at any given time while they learn how different currency pairs behave. It means that they should avoid prominent trading positions on currency pairs that they don’t feel comfortable trading with yet.
You do not understand how leverage can make you or break you.
Leverage is a double-edged sword for FX traders – if used correctly, it can yield tremendous benefits and gains but, if not, ruin a trader financially. While currency traders in Singapore using leverage will amplify the returns of their trades with smaller amounts of capital, currency traders must understand threats like margin calls and stop losses.
You do not understand how to stop losses and make profits work.
As mentioned above, currency traders in Singapore who use leverage can only amplify their returns if they know how to properly implement stop-loss orders and take-profit points into their trading strategy. Before practising demo accounts, currency traders must learn how these tools work, when they should be used, and why.
Only trading the major currency pairs
Many new currency traders in Singapore think they need to open an account with an FX broker and start trading the majors if they want to succeed. It’s not true at all – while some traders prefer to stick to only trading the majors, more often than not, trying this strategy will yield subpar results for them as new traders.
Believing that everyone has the same information
One of the biggest mistakes made by new currency traders is that they think that all of their opponents have access to the same information on how a particular currency pair will behave in the future. It isn’t true – there are countless economic indicators released daily that can impact prices on different pairs; these can include retail sales figures, factory orders, PMI numbers, GDP growth rates etc.
You do not understand macroeconomic news releases.
One of the biggest reasons new traders fall into the trap of believing everyone has the same information is because they don’t understand how influential news releases can be on different currency pairs. Not only do economic figures released by governments and central banks impact different countries differently, but reactions to these figures can vary significantly across multiple currency pairs.
You are not putting in the effort to learn how to trade correctly.
Many traders think that just because there are hundreds or even thousands of currency pairs available for them to trade, it means that they should automatically try trading all/most of them. It’s another common mistake made by new FX traders in Singapore.
Chasing losses instead of cutting them quickly
A typical trait of most human beings is that they tend to act out of emotion when losing money. As a result, instead of cutting losses quickly and getting out of an unprofitable trade, many traders hold on to it for too long in hopes that it will turn around and give back their losses. It’s never good – by chasing their losses, there is always the threat that traders can lose even more money or miss the chance to get into a profitable trade while they hold on for too long to a bad one.