Invest industry provides lucrative opportunities to retail traders. Investors around the world are trading stocks, currencies, ETFs, etc. to ensure a steady cash flow. But, all of them are not experiencing some experiences, and few of them are losing a huge amount of money here. The incidents like these are happening because of the ignorance about the basics of trading, which must be adopted before the execution of the trades. Some naive mistakes are committed by beginners. Today, we will discuss the key mistakes in the investment business which are causing great trouble to the retail traders.
Failing to identify the great broker
As an investor, you have to take the trades with the help of a broker. Beginners fail to choose the right broker, which causes severe problems in the long run. Before choosing one, an investor must check if the broker belongs necessary membership and certification from the law and regulatory organizations or not. He can easily check it by going to the professional website of that specific brokerage and check in the bottom section.
If he finds the necessary documents, he can surely hire that broker to take the services. Newbies are very careless about this, and they get exploited by the fake brokers who cheat using the credit cards of the new traders. Experts talk with fellow investors before taking the services of the newly established brokerage house. Therefore, they get exploited less by unregulated brokers. Click here to contact the professional broker Saxo, and put end to this terrific problem. Start taking the trades in the stock and currency market without facing any problem.
Not taking advantage of paper trading account
A demo account helps to understand the basics of Forex trading by providing practical experience. But, newbies become very reluctant to utilize the demo account which makes them the victim of huge loss later because of the knowledge gap. A demo account is mostly like a real account, but the only difference we find here that the real money is not used here. It indicates that a trader does not have to take responsibility for the loss or profit here.
Experts utilize a demo account for testing their action plans as part of their research work. They do not implement any change in the real account whimsically before getting the result of that search action in the demo account. Beginners should be rational enough to use the demo one before jumping to the real trading industry. This will lessen the percentage of making errors.
The poor risk management plan
Before buying the financial instruments, it is important to analyze the potential risk factor for that certain trade. According to professionals, an ideal risk to reward ratio is 1: 3, which indicates that a trader must not take the risk of more than $1 if his total investment is $3. Rookies are very callous to gauge their performance in advance, which makes them vulnerable to downtrends in the future. Professional do the math of the investment before wasting any money, and for this reason, they can rip the highest profit from the market than the average.
Using high leverage
It works as a great tool to start trade in low investment with the help of the broker. The general ratio of leverage option is 1:10, which may vary according to the abilities of the brokers and the investment capacity of the traders. Greenhorns take a high amount of leverage, which increases the risk to a great extent.
To the bottom line, it can be inferred that if an investor wants to be successful in the FX market, he must be careful enough not to commit mistakes. These faults are very naive as we may avoid these with proper care, but if we do the opposite, we have to be ready to take the loss as the biggest punishment.