Forex trading with high leverage, a day retail trader can make consistent errors and loss of capital he has. Day trader is the name for traders who do daily trading, opening and closing positions on the same day. Being a day trader can be very profitable but there are some mistakes that usually occur in day traders, thus causing losses.
Traders often stumble or rather hooked averaging. This is not something they plan when starting trading, but most traders end up experiencing it.
A major problem with averaging is that losing positions are maintained, potentially costing money and time. A large loss of capital on a single transaction can cripple capital growth for long periods of time.
Position Placement Before News Release
Traders know what news will move the market, but the direction of unknown pair price movement. A trader might even be pretty sure what the news will be about (ie that the Federal Reserve will raise interest rates or not) but still can not predict how the market will react to this news.
There is also the simple fact that due to the high volatility and the emergence of all sorts of orders in the market, stops can occur on both sides of the market. This could lead to a whip-saw form before a trend emerges.
From all these reasons, making a position before the news is issued can jeopardize a trader’s chances of success.
Trading Right After News
The market will react to news releases and often lead to a whip-saw form due to lack of liquidity. Even lucrative deals can turn quickly into huge losses due to uncertain movements. Stops during that period are dependent on liquidity, which may not exist. This means it can cause more losses than has been calculated.
Day traders have to wait for volatility to subside and also wait for the trend to develop after the news is announced. Thus there is the possibility of a slight concern of liquidity, the risk can be managed more effectively and the possibility of a more stable price direction.
These potentially harmful errors can be avoided with sufficient knowledge, discipline and alternative approaches.