Everyone makes mistakes in the trading business. Even after following all the rules, you are bound to lose money. Being a human being it’s nearly impossible for us to follow all the basic rules of investment business and make a consistent profit. This is where the term risk management comes into action. It allows you to make consistent profit at the end of the month even though you will have to lose a few trades.
This is article is dedicated to the novice and intermediate traders. We all know the position trading strategy is a great way to learn the conservative trading technique. But do you think you can make a decent profit and develop your trading skills? Well, the answer depends on your effort. If you manage to avoid the most common mistakes in trading, it won’t take much time to become a successful trader in Singapore. Let’s learn about the five most common mistakes in position trading strategy.
Ignoring the fundamental factors
Fundamental factors are the most important element when it comes to a position trading strategy. They act as leading indicators and give traders a precise signal about the market movement. For instance, if the FED officials hike their interest rate, you can expect a bullish run in the U.S dollar index. This will push the U.S dollar higher against most of its major rivals. So, if you fail to interpret such important news, the chances are very high that you will lose a big portion of your investment within a few months or even weeks.
Trading with the low-end broker
The position trader often thinks they don’t need a professional broker. But the smart traders in Singapore prefer trading CFDs with Saxo since they always offer premium trading environment. Never think you can change your lifestyle by cutting down your trading cost. The moment you start to trade the market with the low-end broker is the very moment you start losing confidence. The high-end brokers like Saxo always offer classic trading tools which significantly helps in technical analysis. So, chose your broker very carefully since your success greatly depends on it.
Ignoring the market trend
The new position traders often try to trade the major reversal. But do you think this is how the professional traders deal with the market? You must learn to trade the market trend or else you are bound to lose money. Trade the daily time frame since it will give you the overall picture of this market. Try to use the simple trend trading strategy and if possible incorporate price action signal to increase your win rate. Never ignore the market trend or try to trade the endpoints of the trend. Stick to the market trend, and you will see positive outcomes.
Taking too much risk
The intermediate position traders always think they will win trades. They don’t have the mentality to embrace the losing trades. To become a successful trader, you must avoid such a mentality. Start to trade the market with a 1% risk even though you will be following position trading strategy. Unless you have extensive experience, you should never risk more than 2-3% of your account balance. Once you learn the proper way to deal with the losing trades, you will truly understand the importance of money management.
Control your emotions
The position trader often becomes emotional after losing a few trades in a row. This is normal but there is a simple solution to this problem. Being a position trader, losing more than three trades in a row means you will have zero profit at the end of the month. So, how will you support your family? You must have a financial backup for six months and this will always keep your confidence level high. Most importantly, it helps a lot to control your emotions in real-life trading.