The Main Mistakes Of Forex Traders
Among the traders there are the ones who do not have enough knowledge and loose their money. Why is this happening and why do few people manage to be successful at Forex?
Lack Of Theoretical Knowledge
The most popular mistake among beginner Forex traders is trading without knowledge, without understanding the principle of the currency market. Many traders presumptuously believe that the foreign exchange market is very simple and here one can do without pre-training. But it is not working this way. In any profession you need to learn, and on Forex it is so and even more.
Beginners in Forex trading often underestimate the importance of knowledge. They do not like to read books or articles and prefer to learn by trial and error on demo accounts. But if you look at the biographies or interviews of the most successful Forex traders, you will see that they studied for years before starting trading, and because of this they earned their fortune.
So, the number one rule is to read and read again about the system.
Lack Of Trading Plan
To conduct any business you need a plan. It’s the same with Forex trading. Without a plan, you will constantly lose your way, it will be difficult for you to understand where you need to move.
One of the most common mistakes of forex traders is trading without a plan. At the same time, traders who are too lazy to create a trading plan are often lazy to keep at least some kind of reporting and analyze their mistakes.
A trading plan is a set of certain rules that together with a strategy point you to how you should manage your capital. It also allows you to specify certain restrictions, for example, to prohibit the use of strategies for following a trend in the summer.
The main point is that these rules are clearly formulated and you follow them unswervingly. In doing so, you need to keep a record of your actions so that you can later analyze and improve your trading.
This skill – record keeping, just distinguishes professionals from beginners. Therefore, try to develop it in yourself.
Forex is a highly volatile market, so the situation on it can drastically change in a matter of minutes. And considering also the fact that many brokers offer leverage that traders enjoy with pleasure, such large changes in the foreign exchange market can be expensive. Another big mistake in forex trading is that traders do not discipline themselves and frivolously manage their credit resources.
Before you start trading, you should answer yourself a few questions:
Will I have the means to live if I lose all the invested capital?
How much of my capital can I lose in one position?
How many positions can I keep open at the same time?
What percentage of winning and losing trades does my trading strategy allow?
What is the optimal risk / reward ratio for me?
Currency trading is a very gambling affair. Especially quickly they are fond of novice traders. They often choose scalping or intraday trading, that is, short-term trading. It is characterized by a minimum of analysis and a quick reaction. Well and still high risks. If you recently discovered Forex, we advise you to study on the daily charts, while constantly updating your theoretical baggage.
Long-term trade requires more competent and disciplined management of capital. Continuous training, daily analysis of your trading, as well as patience and consistency will help you become a successful trader. Ignoring these aspects is the greatest mistake that a forex trader can make.