5 Most Fatal Beginner Trader Mistakes

by Mansi Dandekar Financial Blogger

Starting to jump into the forex world is an interesting experience. But you should be vigilant to avoid risk in general, by learning from the following five types of beginner traders' mistakes:

Lack of Capital: The lack of initial capital ownership by novice traders is a factor in the mistakes they make, and this will also quickly "kill" them. For this reason, many traders destroy their trading accounts during the first month or in the early weeks.

Trading capital can be lost and depleted, before you can even learn about the correct trading process. In most cases, account insecurity arises from mistakes made by novice traders, or failure to make decisions to manage funds properly.

Here are the mistakes beginner traders often do:

Not enough knowledge and experience in the world of trading.
Novice traders are not familiar with the principles of risk management.
Tend to underestimate the risks in trading setup, so it is easy to fall into adverse impulsive transactions.

Another habit that is seen among novice traders is to use strict Stop Loss when trading with small lots, even trading accounts with minimal funds. Please note, lots of small trading capital is not the main source of your account destroyer, but a strict Stop Loss. If you use a Stop Loss that is too close to the Entry, then your position chances to close with losses will be greater and more frequent.

Therefore, try to keep the funds in your trading account sufficient to anticipate changes in market conditions. This will provide the flexibility needed in making trading decisions.

Overtrading: Overtrading is a condition when you open a position with a large size consisting of several lots, with the hope to get the maximum profit. Yet if you look at the character of the forex market in general, you can easily lose half or even all of your capital if you apply this method.

Overtrading can also be caused by the following things:

Too often enter the market.
Trying many positions at once is a cause of overtrading
Over-analyzing market activity and accommodating too much information from news or technical indicators. This is also the fault of the novice trader who often plunges into large losses.
Lack of knowledge about the principles of money management.

First, make money management rules and obey the principles. The capital you use for trading is your medium to get more profit, so treat the capital well. Your responsibility certainly protects these funds. If funds are often lost, the possibility to get profits will also be smaller.

Trading Without Planning: Start trading without concrete planning, just like you give money or funds free of charge to the market because the market will be very easy to take advantage of traders who do not think of planning strategies properly and according to needs. Control the desire to trade spontaneously and trial and error, without referring to the risk management plan or Currency Tips. But if you already have a strong belief, then please do it.

Working hard is the key so that your future trading planning is more mature. So, you should set a plan to determine when to install Stop Loss and when the right time to take profit.

Trading Without Stop-Loss: Trading without Stop Loss, whether realized or not is mostly done by novice traders. Though installing Stop Loss is one of the features needed by traders, so they can control losses when prices move against trading positions. Stop Loss itself can be interpreted as the lowest price limit value, which is determined to limit losses.

When price movements touch this value, it will automatically close your order or position.

Overleveraging: Overleveraging is a factor that causes traders to lose a lot because they tend not to pay attention to leverage in the trading process. The concept of leverage does have two different sides, which can be very profitable, but on the other hand, it can be very detrimental.

Overleveraging itself is trading using a position size that is too large compared to the available margin. Whether we realize it or not, the risk of Overleveraging often strikes beginners who wish to get rich quick from trading.