Good day forex traders.
Welcome to another forex education article. Today we are expanding on our forex mistakes series where we explore the common mistakes of forex trading that often causes the dreaded margin call.
The foreign currency exchange market, forex for short is a highly liquid and volatile market. Due to the massive numbers of participants, sentiments play a major role in the currencies’ valuations. This can work for or against you. If you are in line with the sentiments of the mass, you will probably profit. Go against and a loss of money is likely.
Sentiments change always and especially so during news events. These events are the releases of important economic statistics or policy meeting minutes of central banks. As these often provide insights to the current state of the economy or clues to future possibilities, expectations may change. This is especially so when the event differs much from estimations. In such scenarios, sentiments and hence currency valuations can shift fast resulting in high volatility. This may spell disaster for margin accounts on the wrong side of the trade. An example of this would be a worst than expected US Non-Farm Payroll.
It would be prudent to always ensure proper money management. Limit your exposure using calculated risk managed stop losses. If there is a news release event coming up soon, ask yourself if you can withstand any volatility. Will staying by the sidelines until the news release is over be a wiser choice?
The market will always be there for you but your money once lost, is gone forever.
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