From the beginning, forex trading is a high risk business because it deals with markets whose movements cannot be predicted with certainty. There are many traders who experience loss because of wrong prediction.
Trading profit is very possible to achieve. However, not all traders can do it. Instead of closing positions with profit, many novice traders experience losses.
Let’s look at 4 Dangers That Threaten Trading Profit
False Breakout
Breakout trading strategy is one of techniques that is much favored by traders in general. Ease of use is the reason most traders use this strategy.
Besides, traders also need to be aware of several things that pose a threat to profit trading. One of them is False Breakout.
Why can a false breakout pose a threat to profit trading?
When a breakout occurs at an important level, traders usually will speculate that new opportunities will be formed. However, due to False Breakout, the price reverses so that the opened trading position is in the opposite direction of the price trend.
Overtrading
According to Investopedia, overtrading refers to excessive buying and selling of stocks by either a broker or an individual trader. As a result, risk management that has been made or agreed from the beginning is violated, so that the trading system that is run becomes chaotic.
Besides, overtrading can also damage your trading psychology. Usually, overtrading often happens to novice traders. They assume that the more they open positions the greater the profit opportunity.
At first glance, this does look right. It is the beginning of a threat of trading that must be avoided.
Inadequate Trading Timing
One of the factors determining the success of a trader is to know when the best moment for trading. If you open the correct position but at the wrong time, your results won’t be optimal. This is one of the things that is often overlooked by most traders, especially novice traders.
Basically, in forex trading, there are some of the most dangerous times for trading. At these times, achieving profit will be far more difficult because the market is volatile. With too much risk, this will be a threat of profit trading.
One of the most commonly used ways to find out the best times for trading is to use the economic calendar. In the economic calendar, many economic data release schedules will be presented that can affect currency movements in the forex market. Thus, you can avoid market turmoil that can threaten trading profit.
Currency Volatility
Trading on a pair with high volatility is like a double-edged sword. Sometimes, it can be profitable and vice versa. Because, with high volatility, the opportunity to achieve large profits is also increasingly wide open. This is certainly very good, especially for scalper.
Conversely, high volatility can also be a threat of profit trading. Because, when a currency is volatile, its movements are very easy to change due to the sentiments of market participants. For novice traders, this is certainly very dangerous because they are not ready to face market turmoil quickly.
On the other hand, trading on currency pairs with low volatility is also not good.
When currency volatility is low, the movements do not show a definite direction that make it difficult to analyze.
Read more: 5 Trading Revolutions that Hit the World of Forex Trading