Forex has a very low barrier to entry, and that is what makes it a perfect choice of day traders. In fact, you too can start day trading today with just a laptop, an internet connection and a few hundred bucks.
But you should take the easy entry thing as a promise of quick money. Beginner day traders mostly loose all of their invested money because they make these mistakes.
Here are some avoidable mistakes that the beginner day traders make, and how you can avoid them.
Never Chase Your Losses
Won rate and the risk to reward ratio are two things that you’ll need to keep an eye on while trading.
If you’re winning 10 trades out of 20, your win rate/ percentage should be 50%. As a day trader, you should always try to keep your win rate over 50%.
The risk to reward ratio is tells us about the profits you make while also losing money on rest of the trades. If you lose $50 for every $100 that you make, then your risk to reward ratio is 2. A ratio of 1 indicates that you’re losing as much as you’re winning. So, your total profit is zero.
So, while you’re trying to keep these two indicators within limits, never try to chase your losses, because that can cause you to lose more really quickly.
Trading Without Stopping Loss
You must use a stop loss order with every single trade that you make. This can save you from losing too much money in a trade by stopping the trade if the amount goes under a specified limit.
Risking Too Much
Even the most successful day traders don’t risk more than 1% to 2% of their total day trading account balance. You can read the Rob Booker interview to find out how you can pursue day trading safely.