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  • Friday 5 August 2022

    Common lies to avoid in Forex Trading

    The degree of honesty and self-reflection required in retail trading makes it distinct as a hobby or even a career. Trading is not one of the many professions that consistently allow room for learning from mistakes and developing a skill set. If a trader is not careful with their expectations and risk management, even one loss deal can be disastrous. No trader can bargain with the markets for a raise or hope that the markets will acknowledge their hard work. Truthfulness is important in the field of retail trade since it might be the difference between financial success and failure. In light of this, let's look at 3 lies that traders should not believe today.

    Stop losses are not necessary for trading.

    Regardless of a trader's win percentage, every reliable strategy includes stop losses to a significant extent. This is due to the statistically near-certainty that trading with unchecked risk will eventually have disastrous results. Unchecked risk would still be present in every trade even if a strategy managed to have a win rate of over 95% with steady incremental gains, leading to a few losses that might easily wipe out all previous winnings in a short period of time (I know this from personal experience). Therefore, stop losses, particularly trailing ones, are a crucial tool for traders to protect against unavoidable losses and make their wins last over time.

    I'll quickly compound my account.

    It takes a lot of discipline and patience to gradually build up a sizable trading account. This means that if a retail trader approaches entering and exiting positions through the lens of a get-rich-quick scheme, they are likely to lose money along the road owing to over-leveraging and impulsive trading. They are also likely to feel disillusioned and frustrated. Therefore, it's crucial for traders to set reasonable goals for themselves and to avoid taking success for granted. A few ways to put this into reality are to:

    a) thoroughly backtest whatever tactics you decide to use.

    b) refrain from trading out of financial famine.

    c) understand that your value as a person has nothing to do with the performance of your account.

    Fundamentals aren't very important.

    Every trader should have access to technical analysis, and there are a wide range of technical indicators that are worthwhile researching and incorporating into any trading plan. Additionally, sentiment analysis is useful because the core of trading as a discipline is predicting buying and selling pressure. We must never assume that traders are always buying and selling genuine assets, even with these two essential types of analysis at our disposal.

    It can be simple to think, even unconsciously, that trading can be reduced to a global game of chart-reading in the new era of gamification and excessive speculation driving price action volatility in the markets. Because it is simple to forget that we are trading in actual markets that are affected by actual conditions and events in our world, it is feasible for many traders to lose out on key fundamental triggers and advantageous moments of entry and exit. Therefore, it is always advisable to perform fundamental analysis, whether that involves following macroeconomic data, company fundamentals, or other variables, whether a trader is buying or selling stocks, currency pairings, or bonds.

    Successful risk management is crucial for retail traders. Developing a trading account requires time and effort, so be realistic in your goals. Even at a time of rampant speculation, fundamental analysis is still very important.

    Sifiso Nkwanyana

    Author & Editor

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