Do you want to try trading Forex and succeed? Start with learning the most common mistakes beginners make in the foreign exchange market.
Intuitive trading decisions
The foreign exchange market is not a casino. However, novice traders view it as such, so they use mainly their intuition to make their decisions. While this may sometimes result in success, but ultimately, the trader ends up failing and losing money.
Some Forex companies promise in their promotions that you’ll get rich in no time. Don’t believe them. Yes, there are people who end up rich trading Forex, but there are also those who make a fortune by selling houses. In both cases, this does not happen in one day. It can take years to build up the right experience and turn Forex trading into a full-time profitable job.
The main enemy and biggest mistake trigger of a novice trader are his emotions. When watching the deposit increase or decrease, beginners can lose their minds and take hasty steps to get more money or to stop losing it. This approach is no good. Decision-making should be well-reasoned, rather than emotion-based. In order not to increase tension, place a take-profit and a stop-loss and leave the market alone; don`t monitor it day and night.
Inability to use a stop-loss and a take-profit
When you place a market order and leave it open, you put the entire trading account at risk. For example, when you open a long position for the EUR/USD pair, you can put a stop-loss so that your Buy order will automatically close if the price falls below a certain level. You can limit the number of losses for each separate order, especially if you’re unable to monitor the market all the time. A take-profit order works the same way: it locks in profits by setting a level at which the position should be closed.
Trading against the trend
No wonder they say “Trend is your friend.” You can try to catch short–term price movements or price correction. But in reality, you make a larger and more regular profit if you keep track of the long-term price movements and sell or buy in trend direction. Always watch the global price movements over long periods of time and only after that open trades on minor timeframes.
Intraday short-term trading on minor timeframes M1- M15
Beginners may find it difficult to trade on these timeframes as they have no experience in timeframe synthesis. External factors such as news also matter and can cause problems. In this case, trading can be extremely risky and can lead to large deposit losses. It is recommended to use bigger time intervals such as H1, H4, D1 and above, where the movements are more predictable and the trader can make wiser decisions.
Holding losses for too long
Unlike beginners, an experienced Forex trader can determine when the loss trend is not going to reverse. Instead of hoping for the better, a disciplined trader will take a loss and close the order. Sometimes, life teaches us lessons and we have to learn them and move on.
When important data are released, prices can move tens or hundreds of pips in either direction within a few minutes or seconds. The movement is so swift that it is physically impossible to trade right. The market is extremely feverish and jumps up and down. Forex brokers widen spreads and reduce liquidity, which entails risks and high loss probability. We recommend beginners to refrain from trading during important economic news releases.
Too many open positions
If you open too many positions, you are unlikely to respond to all the events properly and quickly. It is hard to focus on each position when you receive too much information.
Leverage is a double-edged sword because it can improve returns from profitable trades and increase losses on unsuccessful ones. This happens especially in Forex trading, where the trading capital can be depleted if the market entry goes wrong.
Hopefully, our advice will help you make smart decisions and trade successfully.
We also recommend you to start with a demo account and then open a live trading account.