If you are just starting your trading journey through prop firms then you need a trading tool that helps you to execute successful trades. There’s no better choice than MT5 here as it a a powerful trading tool with a lot of features. But when beginners use this tool they get confused especially when they’re dealing with prop firm challenges or managing a funded account. But with the right knowledge and guidance traders can use it more effectively. There are some mistakes that each traders mostly make during trading so let’s discuss some of the most common mistakes beginners make on MT5 and, more importantly, how to avoid them. Let’s start it!
Not Understanding How MT5 Works
MT5 isn’t just another fancy trading app but it’s packed with features that can make or break your trades. A lot of new traders use it without fully understanding how to use the platform which can lead to costly errors.
Solution:
- Spend time exploring the platform in a demo account before risking real capital.
- Learn how to set up your charts, indicators, and order types.
- Customize your workspace to make navigation easier.
- Watch tutorials or take a short online course specifically on the MT5 trading platform.
The more comfortable you are with the platform, the fewer mistakes you’ll make when real money is on the line.
Overleveraging Without Understanding the Risks
Leverage can be beneficial as it can amplify your profits but it can also wipe out your account in minutes if you’re not careful. Many beginners, especially those trading in prop firm accounts fall into the trap of overleveraging because they see the potential for massive gains.
Solution:
- Adhere to cautious leverage, particularly at the beginning. Compared to going all in with a ratio of 1:100 or greater, a ratio of 1:10 or 1:20 is far safer.
- Always figure out the danger of each trade. Generally speaking, you should never risk more than 1% to 2% of your account on a single deal.
- Recall that prop firms are subject to strict risk management regulations. You risk losing your financing if you violate them.
Ignoring Risk Management Rules
- In relation to risk management, this is where a lot of new traders fail. Prop companies usually have daily drawdown caps, and you’re out if you go over them. It’s as easy as that.
Solution:
- Establish and stick to a daily loss cap for yourself.
- Stop-loss orders should be used on all trades.
- Maintain a healthy risk-to-reward ratio. At least a 1:2 ratio is ideal (for instance, risking $50 to make $100).
- Keep track of your transactions and evaluate what is and is not working. A trading notebook has the power to alter everything.
Overtrading in an Attempt to Recover Losses
- Everyone has experienced losing money and then attempting to recover it by making trade after transaction. This is a quick way to blow your account and it’s known as revenge trading.
Solution:
- Recognize that losing is a necessary element of the game. The secret is to control your losses, even if you’re a professional trader.
- To avoid overtrading, set a daily maximum for the number of trades.
- If you find yourself emotionally trading, leave. Taking a little pause might help you focus.
Relying Too Much on Indicators
- Although indicators might be useful, you won’t become a better trader by piling five different indicators on your chart. In actuality, it frequently results in misunderstandings and contradicting signals.
Solution:
- Make things easy. Make use of a small number of complementary key indicators. For instance, a volume indicator, RSI, and moving average can all be useful in tandem.
- Gain a significant advantage by learning price action, which is the way that prices move without the need for indicators.
- Before using your approach in actual trading, test it in a demo account.
Trading Without a Solid Strategy
Jumping into trades without a clear plan is like driving blindfolded—you might get lucky a few times, but eventually, you’ll crash. Many beginners trade based on gut feelings or random tips, which rarely ends well.
Solution:
- Develop a strategy that includes entry and exit rules, risk management, and trade size.
- Backtest your strategy on historical data to see how it performs.
- Stick to your plan and avoid making impulsive decisions based on emotions.
Not Paying Attention to News and Events
The forex market is heavily influenced by economic news and events. If you’re unaware of major news releases, you could get caught in a sudden spike or crash, wiping out your account in seconds.
Solution:
- Check an economic calendar daily to stay informed about major events like interest rate decisions, employment reports, and geopolitical events.
- Avoid trading just before high-impact news if you’re not comfortable with volatility.
- If you must trade during news events, use wider stop losses or reduce your position size to manage risk.
