Forex 101: 4 Common Mistakes Forex Traders Tend To Do
Forex trading is one of the most popular markets around and it’s no surprise that various traders switch or start with forex. The reason why this trade is exceptionally popular is because of its many pros. Like how it’s the largest market, how it’s the most liquid, how it’s decentralized and even how lucrative it is.
This trade is also the most timeless one among all since it’s always relevant. But despite its many perks, forex trading is also deemed to be one of the riskiest trades today. So traders need to be focused and alert when trading with forex.
But even if a trader is filled with focus and attentiveness, tons of traders still fail in this market. That’s because there are things most traders practice that lead them to failure. So if you don’t want to fall in their footsteps, check out the list of common mistakes traders do, for you to avoid.
1. Getting into a trade they don’t fully know
One of the things most starting traders think is that trade is a matter of luck. Although luck does play a tiny part, trade is speculation. Trade is purely studying what the market’s next move is. And to do just that, you need to KNOW YOUR MARKET.
So before actually trading, make sure to do your homework and learn about forex trading. Learn about how the market works, how to use trading tools, how to read charts, how to open a position and so much more.
Remember, knowledge is power, especially in trade! To know more about the what, how and whys of forex trading consider taking courses, attending seminars/webinars and even reading about it often.
2. Letting their emotions get the best of them
One of the things that don’t mix well in trade is emotions. This is something that can potentially ruin your overall trading flow and strategy. When you make decisions based on your emotions, most of the time you’re doing more harm than good.
That’s why trading strategies are created, to guide you on how you’ll execute a trade. But when emotions come into the equation, choices become irrational and losses become inevitable. So when trading, try to stay firm and stick to your strategy.
In most common cases emotions do intervene when a loss occurs. A loss can cause traders to feel disappointment, regret, denial and so on. So when they’re overwhelmed with emotions they tend to make irrational choices, like winning back a lost trade.
What you can do to avoid this is by accepting your losses. Losing is part of the game, so take it like a champ and move forward. Remember, never try to compensate for a loss, review and switch up your strategy if needed.
3. Investing more than they can afford
Trade is volatile and that’s something you should keep in mind. So before trading make sure to only wager on what you can lose. Forex trading is high in leverage and although this can also be an advantage, it’s often not.
What you can do is get well acquainted with forex’s margin and leverage to know the right amount to invest. Not fully knowing the margin and leverage can cause you to accidentally trade in more capital than needed, risking money you can afford to lose!
4. Trading without a strategy
Because of technological advancements, trading today has become accessible as ever. You can buy and sell stocks through your mobile whenever and wherever you are. And because of this, most novices in forex trading overlook strategies.
Trading without a strategy is a recipe for disaster! This is why tons of traders fail ever so often. Think about it this way, a strategy is like a gun and a forex market is the warzone. So would you consider heading off to war without a gun?
So before wagering your hard-earned money, consider following a strategy. There are various kinds of forex trading strategies to choose from; day trading, scalping, position trading, trend trading, swing trader and more!
Take away
Now you know the common mistakes forex traders make, use this to your advantage and try to avoid them. These mistakes are unconscious things most traders make that are fueled by a lack of knowledge. But now you know these fallacies, try to stir away from them.
But if you do ever find yourself doing some of the mistakes listed, just take a breather and stop. Or if it’s too late, take whatever the result is and use the situation as a lesson.
