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Tips for the Novice Traders to Avoid the Losing Trades

Jul 14, 2020

Tips for the Novice Traders to Avoid the Losing Trades
Novice traders are excited about the Forex market. They are always calculating the profit potential and thinking about how they can fund the maximum possible amount. In fact, the majority of rookies in the United Kingdom start with a decent amount of capital.

But they fail to control the trades as they don’t have enough experience in the market. Soon, they get to learn the truth, trading is not a get rich quick scheme. After losing some money, they get trapped in an initial phase of this business.

Those who are smart manage to become skilled traders. Those who are aggressive and don’t have any control over their emotions end up losing more money.

This article is not for advanced traders. Still, advanced traders can learn many things that they may have forgotten over the years. So let’s begin and explore some amazing tips we can use to avoid some of the losing trades.

Avoid trading in the last hours

This is a method that every professional trader follows. But ask the new traders. They are always trying to make some profit right before the market close. This is a hazardous time to trade and you should not try to do so in this kind of market condition.

Though the volatility will vary all of a sudden, you can experience heavy spikes. You should stop taking any trades 4 hours before the market closes. Just by using this rule, you can avoid many losing trades.

Analyze your past trade and you will realize how many trades you have lost over the years just by trying to trade during the last hours before the market closes.

Develop strong knowledge of trading

Knowledgeable traders are always good at trading. Learn more about Forex trading so that you understand the price mechanism better. Every price movement should be explained with logical details. Let’s say you have spotted a massive spike in the GBPUSD pair.

Do you know the reason for it? If not, study hard and find out. The market never reacts randomly. In fact, the price movement of a certain asset is a reflection of the economic state of a particular nation. Studying a period might be boring but you must go through this process.

As soon as you learn the importance of strong education, you will develop the habit of learning new things. This will allow you to avoid many losing trades.

Stop adding a position to the losing trades

Adding a position to the losing trades is a prevalent practice. In fact, the novice traders always consider it as the ideal way of averaging the losses. Though it works, when it fails, it is going to multiply the losses.

Instead of risking more on the same asset, diversify your risk profile. This will allow you to trade the market with more confidence. In fact, if the risk-reward ratio is maintained properly, you will feel comfortable even after knowing a few traders will hit the stop loss.

You might say that you have taken a long trade in the GBPUSD pair in the first support, so there is nothing wrong with taking the trade at the second support level. It’s true but do you have the guarantee the second support will hold?

Since you don’t have any certainty that it will, it’s better not to add a new position to a losing trade.

Stop trying to pick to the tops and bottoms

Reversal trading has become one of the favorite trading strategies for new traders. Though they learn a lot about the risk of a reversal trading system, they can refrain from such trades.

You can’t trade the tops and bottoms in the currency pairs because it imposes a great level of risk. However, if you feel like reversal trading is the best way of making money, start educating yourself on the chart pattern trading techniques.

It will help you to secure a big profit from the starting of a new trader. But remember, chart pattern trading is an advanced trading strategy.

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