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Day trading is a common practice in the foreign exchange market. In the currency market, day trading can become a high-leverage game, which when coupled with misguided practices, can lead a trader to lose all of his assets.

One common mistake day traders make is averaging down. Although this might be something that is not intentional in the beginning, these traders oftentimes end up doing it anyway. In averaging down, what is being held is a losing position because the trader will potentially sacrifice both money and time. Inevitably, the practice of averaging down will lead to large losses because a trend can last longer than a trader can be liquid.

Another common mistake day traders commit is to pre-position for news. Although traders in general know of news events that will affect the movement of the market, they do not know the direction of this movement in advance. For instance, a trader may be confident about a certain news announcement, like the Federal Reserve raising interest rates, but he still will not be able to predict the market’s reaction to this news. Oftentimes, there are additional figures, or statements made by the news, that makes these movements become illogical. By using this strategy, traders who rely on news announcements to make a position end up jeopardizing their chances for success.

These are just two of the most common situations that are to be avoided by day traders if they do not want to lose a significant part of their assets. In their eagerness to increase their returns, they might end up getting lower returns if they commit these mistakes.