New Forex Trader Mistakes
This is especially true as this market is open globally around the clock – giving these new traders greater flexibility regarding when to trade. Initial capital requirements are attractive as well – thanks to the high leverage offered by most brokers, you can get started with just a few hundred dollars.To get more news about Forex Trading Mistakes, you can visit wikifx.com official website.
However, this experience often turns out to be more difficult than anticipated.
We’ve been there and seen it all before – new traders often make the same mistakes, over and over. If you can eliminate these six mistakes from your trading you’re significantly increasing your chances of success.
Mistake 1: Starting without any education
The most common Forex trading mistake to avoid is believing you can succeed without any experience or trading education. You’d be amazed at how many new traders think they are somehow special and can make money from day one. These fantasies are often short-lived and expensive!
Trading is a skill and like any other skill on the planet, it takes time to get good at it. And, like any other skill, you either develop it through trial and error or you can cut your learning curve by learning from an expert. In practice, you need both.
The problem with trading is newcomers can often confuse luck with expertise. Everyone has almost a 50:50 chance of having a winning first trade, no matter their skill level! You’d never get this with a skill like chess, painting or football – where half the newcomers got the impression they were experts after their first go at it. However, the fact is over the long term performance reverts to the trader’s mean skill level (their edge).
Investing in a trading education that can truly help you understand how the markets and trading works is indispensable if you want to outperform the masses of other Forex beginners. We hope it is with My Trading Skills, but if we’re not for you then please try to educate yourself elsewhere.
Don’t run before you can walk! Learn the basics first, start out small and slowly, and forget about being successful with “get-rich-quick schemes”
Mistake 2: Trading without a plan
Because most traders are trying so hard to make the most of the trading opportunities that the markets offer, they forget to follow their trading plan – if they even have one!
This, by the way, is what differentiates a professional trader from a beginner: the way they approach their daily trading.
Beginner traders will mostly go from trade to trade without a plan and trade on feelings and whims, while more experienced traders will follow a trading plan and a routine that they spend energy and time to develop.A trading method should always be part of your trading, allowing you to make money in a more consistent manner. It allows you to better spot trading opportunities, and better manage your open positions. So now you understand why trading decisions should follow a well-established process according to an effective trading strategy, preferably one that has been backtested.
Mistake 3: Trading without any money and risk management rules
Most beginner Forex traders forget to use a stop-loss order, which is an automatic order that says to your broker to close your position after it reaches a certain level of loss.
If you do not use stop-loss orders, it means that you have an open-ended risk, as your positions can freely fluctuate depending on the market’s price movements. Thus, there is a greater risk of exaggerated losses if things aren’t going your way, because you’re not limiting your losing positions to a certain level, leaving you vulnerable to big swings against your position.
Mistake 4: Averaging down (or up) to redeem losing positions
Well, when losing money, the prudent thing to do is to cut your losses. However, many traders fail to do so. On the contrary, they hang onto their losing positions in hopes that they reverse, or put up even more money into their losing positions.
Why would beginner traders do that?
Because they hope that the market will evolve in their direction again, and that their current losing positions will turn profitable and make even more money. In most cases, however, their losses are compounded, with prices moving against them longer than expected.
Mistake 5: Using excessive leverage
Not understanding and overusing leverage is probably the most costly mistake new traders make. There was a good reason why ESMA stepped in and capped it for retail traders in the EU – it is very poorly understood.
Leverage and margin trading are amazing tools that help you trade more money than you have in your trading account, allowing you greater market exposure. But this only benefits you if you have a consistently profitable strategy with positive expectation.