The great thing about forex trading is that almost anyone with a computer, internet connection and a bit of extra cash can dive in. With that, though, comes those who enter without preparation. That’s when you hear their stories of failing at forex trading and give you a bad taste if thinking of entering.
Don’t let other people’s mistakes taint the potential success of forex trading. By proper preparation, you can avoid many common errors new forex traders make.
Want to start forex trading and be successful at it? Avoid the following five common mistakes many new forex traders make.
Not Stopping if You Keep Losing
A common mistake that many traders (not just forex traders) make is not stopping when they keep losing. Think about it – if you’re losing more traders than you’re winning, how do you expect to gain a profit? Unless you hit the motherload of all trades (which don’t bank on it), you’re ultimately going to lose it all.
Ideally, you want to keep your win-rate (how many trades you win on average) above 50 percent. For example, if you make 100 trades in a week and only win 30 of them, you’re win-rate would be 30 percent. That’s not very good.
Taking Too High of a Risk
If you’re trading, you need to be comfortable with a little bit of risk. For beginners, it’s not a bad idea to keep your risk level on the lower end until you develop more confidence in your skills.
Base your risk off of how much you could afford to lose without it affecting your personal finances and life. If you have a huge nest egg set aside for trading, maybe you can handle a higher risk tolerance. However, if you’re just starting with a few hundred dollars, you may want to ease up on those risky trades.
Not Doing Enough Research
A profitable trader most likely does hours of research behind the scenes. He or she spends hours going through the markets, their strategies and world news to prep for their next day of trading. Not doing any research is basically going into a trade blind.
Research also includes your broker and platform for trading. You want to have them line up with your values and what you’re trading. For example, for those trading in Switzerland, look at a BDSwiss review to see if that brokerage firm is right for you.
Winning Back a Lose
Although it’s tempting to try and win back a significant loss or go all-in on a trade, that’s an extremely risky move and a common mistake. You have your trade strategy in place for a reason. When you have those losing streak moments, stick to your plan and avoid the all-in feelings.
Not Having a Plan
With that said, not having a trading plan is another common mistake. Just winging it with your trades is never a good idea.
A trading strategy includes your risk levels and management, your selling point, when to stop and other elements that keep you on track. Spend time before you start creating a document for your trading strategy.
These five common mistakes for forex traders can help you stay clear of them and on the path of success. Although they may still happen to you, this may help you recognize them quickly and adjust your course of action.