The access to the forex exchange market is a cakewalk. All you need is a computer, robust internet connection, and as less as a few hundred dollars to start the proceedings. Provided this low barrier entry, investors can’t help attracted to the forex market.
However, being new to the trading world, many people tend to commit a lot of mistakes at EverForex. Some of you might say that slip-ups are part and parcel when you are all set to explore a new discipline. But since trading errors come up with a hefty price, not all of us have the luxury to digest them merely as a “learning experience.”
Instead of learning the hard way, you should go through the following list of the most anticipated blunders made by new traders:
- Falling short of a plan
Without any doubt, luck plays a crucial role in trading because there are factors that fall outside your grasp. But it does not mean you should expose yourself without a concrete roadmap. Unfortunately, beginners have a nag for not showing up with a robust framework.
As we all know, winning and losing both can play on our minds big time. So if you deprived of a crystal clear plan, you would have a hard time to figure out whether you should continue or quit after reaching a certain point. Broadly put, the trading plan guides a trader regarding how to utilize the investment in the best possible fashion.
The job is not over as soon as you finalized outlining the strategy. It is equally essential to stick to it religiously. Indeed, some elements will distract you from doing so, but you have to show resilience.
- Lacking risk management
There is no denying the fact that positivity is an excellent attribute. That said, you can’t abandon being realistic. Many newbies step into the forex world, oozing with positive vibes to get rich at the earliest. But, more often than not, they bid farewell to the trading in a matter of a few months. The takeaway message being, trading is a bumpy road and not thinking about losses means you are putting too much on the line.
That’s where risk management swings into action. It enables a trader to evaluate how much amount he can afford to lose on a single trade or in a single day. For example, according to financial experts, you should set a threshold of losing 1 percent per trade. That way, losing multiple trades won’t break your bank, and you will be able to hang in the market for a long time.
- Trading with a defensive mindset
New forex traders tend to go into their shell after tasting a few defeats. This mindset is harmful because it triggers you to part ways from losses while ignoring the potential winning trades. Remember, there is no seasoned trader who has never confronted losing streaks during, regardless of how celebrated his career may be.
The best way to get over this state of mind is to step back and analyze where you went wrong. This practice is bound to fuel your confidence.
Having years of experience by his side, a prudent trader never allows emotions to get better of him. Whether he is losing or winning, he would know his limits and operate within them.
But this does not stand true for an overwhelming majority of the new traders. Their concentration punctured in the face of sentiments like fear and excitement. As a result, they engage in overtrading to get back the lost money or multiply the profit. Overtrading typically occurs in two ways:
- Trading frequently in a single market
- Investing in too many markets at the same time
Both these practices go against the essence of smart trading, that keeping oneself concealed to risk as much as practical. Being a newcomer, you may feel prompted to give a shot to overtrading. In that situation, you should remind yourself of the trading plan. In all likelihood, this tactic will stop you from throwing all your weight behind this risky venture.
- Failing to maintain records
All the traders who have prospered their lives through trading have one thing in common. That being, their habit of maintaining a detailed history of transactions. They keep a journal and jot down every minor and significant detail in it.
It is handy when it comes to reminding you of your prior mistakes so that you can get them out of the system. Aside from that, the journal serves the following benefits to traders:
- It allows you to keep a record of your success.
- You can identify and subsequently rectify your weaknesses through a trading journal.
- By reviewing it, the industry-centric data does not evade your memory.
Unfortunately, a lot of beginners consider this an exercise in futility, which eventually results in their early exit from the trading discipline. If you are aiming for a lengthy career in the forex world, skip this measure on your own.
- Not selecting the right broker
Have you ever wondered why the majority of inexperienced traders becomes the victim of scams? The logic behind this is not difficult to crack; they don’t select a broker in a structured way. All your forex strategies will come to naught when your broker is an outright fraudster.
As they say, haste makes waste. So before getting hooked up with a broker, make sure you take the following things into account:
- As a trading party, you will oblige to share a lot of sensitive data with your broker. Thus, it’s crucial to inquire whether the broker is abiding by the regulatory authorities of the respective country. For example, the regulatory bodies of the USA include NFA and CFTC.
- Ensure that the broker is available for customer service throughout the trading hours.
- You must scratch up the trading platform. It must be visually appealing and free of unnecessary complications.
Until a broker fulfills the above criteria, you should not stop hunting.
- Overlooking new releases
You can’t predict the stability of the trading market. It could fluctuate at any moment. However, you can anticipate to this rise and fall by staying current on data. A new trader generally becomes so engrossed in trading that he misses out on the economic indicators and thereby fails to make the most of many opportunities.
The final verdict
As with any other trade, learning forex skills will also take time. There is no need to mention the fact that you will also have a fair share of mistakes while mastering this art. But if you start well, you will be well-equipped to meet all the challenges down the road.
For more information, please go to everforex.com.au