Even small mistakes can cost big in the Forex world. Read these five mistakes and learn how to avoid them so that you don’t lose money when trading Forex.
Forex trading is a pretty popular activity these days. So popular that it has made the Forex market become the world’s largest market. In fact, 2021 data shows that there are about 13.9 million online traders. More precisely, this means that one in every 561 people is a Forex trader.
One reason why trading Forex has become so widespread is the fact that it is so much easier to join this market than it was decades ago. Today, all you need to start trading is a strong Internet connection, a computer, relevant software, and a broker’s account. Sounds easy, right?
Well, the truth is that, while it’s easier to join the market and trade than before, there are still many pitfalls that can make novices lose money. If you fear making mistakes that will cost you big in your trading journey, you’ve come to the right place!
Perceiving trading as a make-money-fast gig
It’s not your fault for this one, but you need to be aware that doing so it’s a huge mistake.
Perceiving trading Forex as a way to get rich overnight is a common mistake fueled by a lot of misleading marketing that promotes this type of investment. The truth is that this myth only makes traders have unrealistic expectations that can make them lose money.
Thinking that trading Forex is a way to make a lot of money fast can lead to poor trading decisions. You may enter riskier trades because you want to make a hit. Or, you may not stay committed and motivated to be consistent, which is really important in the Forex sphere.
So, how do you avoid that? Well, start by being aware that this perception is only a myth. Understand that it takes time and consistency to become a good trader and make a lot of money from Forex trading. Even if you do win a lot of money in your first days as a trader, which is actually pretty difficult for a beginner, don’t see this as the peak of your trading journey. Stay consistent and committed to becoming a better trader and winning even more money.
Choosing a random broker
One of the biggest mistakes you can make as a novice trader is choosing a random broker. The broker you choose to trade with can literally impact your trading experiences in a very good or very bad way.
Know that there are many pitfalls related to choosing a broker, including the fact that the broker may not be legit, they might not offer you the right tools YOU need for YOUR trading style, or that the broker may not have a secure trading platform. All these aspects, and more, are essential to consider when choosing a broker. That is why it is not wise to choose the first Forex broker you see.
Instead, make sure that you understand your trading needs and do your research to choose the right broker. For example, if you want more affordable trades, meaning that you favor tighter spreads, you should look for a broker with tight FX spreads.
Another thing you should do is to check the trading platform before depositing big sums of money to trade with a broker. Start by creating a demo account or depositing a small amount of money and see if the trading platform performs well and matches your expectations and needs. Consider factors like customer support, security measures, how fast the platform works, and the tools offered. As a beginner, you should also look for a broker that provides learning materials to help you become a better trader.
Trading more than you can afford to lose
Another horrible mistake you can make as a novice trader is to trade more money than you can actually afford to lose. Like it or not, the trading world isn’t risk-free, meaning that you can also lose money for reasons that, sometimes, are out of your control.
So, that is why it is essential to avoid trading more than you can lose so that you don’t end up with financial problems. More precisely, make sure that you don’t trade the money you need for other essential things like debt, rent, or other essential expenses.
If you enter a trade and lose, don’t trade the money you can’t afford to lose, hoping that you’ll win all your money back. Instead, wait until you have more extra funds that you can invest.
Ignoring your emotions while trading
Emotional trading is a real thing, and you should be very aware of that if you want to make good trading decisions. Essentially, emotional trading is when you allow your personal feelings and emotions to impact your decision-making. When you base your trading decisions on emotions, it’s challenging to assess risks correctly and make advantageous choices.
For example, you may feel stressed or anxious for personal reasons. In this case, you are more prone to make mistakes and ignore risks. Or, you may feel really excited about winning a large amount of money which, again, makes you more likely to miss the real risks of entering a trade.
That being said, you need to make sure that your emotions never influence your trading decisions. If you’re feeling either too stressed, too anxious, or too excited about something, it’s best to give yourself some time to balance your emotional state before entering or exiting a trade.
Not staying up-to-date with global news
The Forex world is largely influenced by what is happening around the world. More precisely, various global events can impact the value of currencies, from economic events to natural disasters, political crises, or pandemics.
For this reason, staying up-to-date with what is happening around the world allows you to make informed trading decisions and move quickly to enter or exit a trade. You’re more empowered to protect yourself from losing money when you can guess how the market will move based on what happened.