10 Most Common Mistakes in Forex trading
Forex trading is an attractive market for traders looking to make big profits. The high degree of leverage it allows means that anyone with just a little cash and an internet connection can dive into the forex trading market. However, when novices do enter the forex arena, there are some common mistakes that should be avoided.
Read the top 10 common mistakes below, avoid and you should be better off than any average forex beginner!
1. Trading too Much
That high degree of leverage – some trading platforms allow leverage of up to 100 to 1 – certainly makes getting started in forex trading easier, but it carries its own risk. As with other forms of financial trading, take the approach that you will not trade any money that you cannot afford to lose, and always keep some of your capital locked into a savings account that requires notice – this way you will always have emergency funds.
2. Pre-positioning
Political and commercial events are key factors in determining forex trading rates. A common mistake made in forex trading is taking a position in the market before a news item is published. This makes an assumption of how the market will react, and can mean it is difficult to change course if your prediction turns out to be wrong.
3. Jumping in
When a big news story breaks, the forex market can get pretty volatile. Traders should avoid jumping in without a plan, though. Such choppy waters should only be navigated with a solid plan.
4. Entry Errors
It sounds obvious, but take an extra moment to review all your entries before submitting a trade. Particularly when the market if volatile, you can rush to complete trading orders. A slipped digit can make all the difference to making or losing money.
5. Over-indicating
Avoid adding too many indicators to your trading strategy. Indication tools can be a distraction and often prevent novice traders from fully understanding the raw data that is truly necessary for successful forex trading.
6. Switching
If you have done your research and developed a strategy, you should be confident in it. Even a couple of losses may not mean the strategy is fundamentally flawed. Assess your strategy regularly rather than flitting between several. This lack of consistency often results in no strategy at all.
7. Going with the First Broker
The growth in Internet trading means there are many options out there for your forex brokerage trading. But don’t just go with the first one you find. Research to get the best broker for your needs. Find out about which currencies they trade, their fees, how transfers are made and the leverage they allow.
8. Being unrealistic
Forex trading is very unlikely to make you rich overnight. Like any financial trading environment it is volatile. Treat it like a business and try to achieve steady profit growth.
9. Averaging down
Have a pre-planned strategy for exiting losing positions. Many novice traders throw more money into losing positions to try to redeem their losses. Sometimes you just have to take the hit and retreat.
10. Getting emotional
Forex trading should be undertaken dispassionately and calmly. Keep a lid on your emotions to avoid getting carried away.
Where to go from here?
Now when you know all the most common mistakes, you are much better prepared and can avoid of getting caught repeating them. Also read about the >>10 most important factors in online forex trading or, if you have not already done so, read the >>3 step Forex Trading Guide for beginners.
As outlined in top 6 position above, you should make sure to choose the best forex broker. We have helped you and a large number of forex trading beginners before on the way here; so do not miss out on our forex broker’s top list.
