Beginners' Forex Trading Mistakes to Avoid | Motilal Oswal

Forex Trading Mistakes to Avoid

Of late, forex online trading has caught on in India. An increasing number of individuals are getting into the currency market hoping to make profits by leveraging the currency price movements. If you’re one among these individuals who would like to start intraday trading in forex, then this article is for you. Here are some of the most common mistakes that both beginners and experts make and how you can avoid them. 

1. Using high amounts of leverage 

Leverage is a double-edged sword. It allows you to take a large position by just depositing a fraction of the trade value. Using high leverages you can significantly multiply your profits if the trade goes in your favour. However, if the trade goes against your expectations, you can also end up making severe losses. 

To avoid making this mistake, always make sure that you use low amounts of leverage. Only use leverage up to the point that you can afford to lose. This way, you can protect yourself from downsides to a large extent. 

 

2. Not paying attention to technical trading indicators

The day to day price movements in the currency market are influenced by technical factors. Getting into forex trading online without understanding or paying attention to technical trading indicators is a surefire way to experience losses. 

To avoid making this mistake, initiate trades based on the technical trading indicators like MACD and candlestick patterns. This will help you anticipate the price movement and take positions accordingly. 

 

3. Revenge trading 

Experiencing losses is a part and parcel of online trading. This is true even in the case of the currency market. However, many traders tend to succumb to revenge trading when they face a loss. Revenge trading is when an individual tries to put more money into trading in the hopes of getting back what they lost. 

This is however a bad idea. Succumbing to emotions when trading will lead you to make wrong decisions. To prevent this from happening, always take a few days off after a loss to recover. In the meantime, analyse and reassess your loss-making trade and try to find out where you went wrong. This exercise will help you become a better trader. 

 

4. Taking positions anticipating the news 

A large number of traders, usually beginners, tend to make this mistake. They place trades just before a major news event in the hopes of cashing in on the volatility. Such a move, however, backfires more often than not. 

When it comes to forex trading online, the price movements can be very unpredictable during times of high volatility. Even if the news event is favourable, the price movements in the currency pair may not reflect appropriately. 

The best way to avoid making this mistake is to refrain from making any trades before any news event. Wait till after the news event before initiating any trades and let the volatility die down first. 

Conclusion

Before you initiate a forex trade, always formulate a plan and stick to it. Also, place appropriate stop losses to limit downsides. That said, if you’re someone who wants to get into forex online trading, get in touch with Motilal Oswal right away. You can open a demat account and a trading account online within just a few minutes, which is a prerequisite for forex trading.

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