Discussion Topic: Overlooked Risks of Forex
Forex Trading or Currency Trading involves a lot of risks. If it didn’t, then everyone would have been a billionaire! Today we are going to point out some risks of forex trading that are overlooked or unnoticed by the majority of the traders. And these risks eventually force them towards making huge losses and thrown out of the market.
Check out if you are one of them to be trapped inside one of these risks, then avoid them and get yourself to a safer position. So let’s begin with our discussion - 5 Most Overlooked Risks No One Going to Tell You.
Overlooked Risk 1 - The Risk of Boredom:
Lot of people comes into forex trading because of the prospect of earning big money in a comparatively short span of time. But some of the times, there’s just not that much activity in the market or your trading system just is not spotting any of the moves.
If the trader gets impatient, his mind may force him to abandon his current trading system or may force him to take trades that may become fatal.
If you find yourself to be impatient and can’t hold to get into the market, then it would be better for you to step back from your charts for a period of time. Break off the monotony, take a break, read the market position more carefully and then step back into the trading.
Overlooked Risk 2 - The Risk of “Drawups”:
We know that you are fully aware of the dangers of drawdowns, but do you know that you may also face risks when your account jumps in value or incurs a “drawup”?
Yes! You heard it right. Traders also witness a risk after getting a series of wins. After undergoing a successful winning streak, many traders tend to take awful trading decisions because of overconfidence.
Sometimes they end up growing their position sizes to such uncontrollable levels, taking too many trades, and abandoning their trading strategies. Eventually, end up with a huge loss because of overconfidence.
This is exactly why it’s crucial for traders to always control their trading emotions. Remember to always follow your (winning!) trading plan and keep your ego under control!
Overlooked Risk 3 - The Risk of Sequencing:
Regardless of how well you manage your trades or how consistent your trading strategy is, you never actually know in advance the sequence of your winning and losing trades.
A trader undergoes sequencing risk when he starts to take the sequencing of his wins and losses out of a statistical context of use. For example, you may undergo a series of wins and think that you have mastered the markets, which can easily build up overconfidence.
Similarly, a series of losses may make you doubtful about yourself or about your trading plan, leading you to deflect from your trading strategies and make risky trading decisions.
Even at times of alternating wins and losses can be comprehended the wrong way. If you observe your account balance just bouncing up and down with no real progress, you might assume it as a sign that you are not improving and eventually lose motivation or give up trading.
Fortunately, there is a way to keep off this dangerous mindset. By using a trading journal and by doing paper trading, you can help put things into the right position and keep the greater picture in your mind. This only can be done by keeping track of your trading stats, so put in the activities and always update your journals!
Overlooked Risk 4 - Over Excitement or Addiction:
We know that forex market is open 24 hours a day and you may take position anytime of the day. Some new traders can’t control their excitement and start trading throughout the day (like addicted) without waiting for opportunities.
This actually makes them very tired and this lack of energy prevents them from taking good trading decisions. Eventually, they make big mistakes and gets out of the market.
So you have to control your excitement and trade only when you see the opportunity in trading charts.
Overlooked Risk 5 - Emotional Bias:
When you consider the emotional bias on the forex trading you will witness that it is only feelings that have been used to trade many of the wrong trades.
This is something you should try to avoid as all forex trading needs to be managed with facts and not emotions. Emotional bias includes:
Fear of losing your money through trading: When you trade with this you will either do an under value trade or hold onto a losing trade hoping that they will turn profitable.
Greed to get more profit: Here you could ignore some reversal pattern when you are expecting gains. For Example, you may view a bullish divergence pattern and expect the market to go up, in the meantime the market shows a double top and you ignore it in hope of making larger profits.
The Conclusion: Overlooked Risks of Forex Trading
In this topic, you came to know those 5 risks that most traders ignore, and later they pay the price. So be careful and observe yourself closely to avoid this kind of risks.
Always keep in mind: wait for opportunities, be confident but not overconfident, don’t take trading as a gamble, don’t get overexcited, and control your emotions while trading.
We hope that you have enjoyed the above article alerting you on the top 5 overlooked risks of forex trading. Be with us to explore forex trading, stocks trading, and other money-making opportunities.
Leave us some comments, and let us know what you think about forex trading risks. Also, let us know what risks you had witnessed while trading in the forex market.