Due to the pandemic and accessibility of the internet, there has been a surge of people who want to trade forex. However, this means that there are also a lot of newbies who are making rookie mistakes on how they do trading. These mistakes, if not addressed properly can cause serious financial damage. Here are 10 mistakes that new traders should avoid:
Inadequate Trading Education
It is a bad idea to risk money if you don’t know what you are getting into. This is why it is best to educate yourself first with the basics of forex trading before you open a trade. Also, new traders should be patient and use demo accounts to get a good feel on how the trading works. This minimizes unnecessary trials and errors with real money.
Not Using Levarate, Stop Loss, and Other Instruments
These instruments were made so traders can minimize and control potential risks. It is a common mistake of beginners to not take advantage of these instruments because they are too excited to open a trade.
Risking More Than You Can Afford
It is a common saying in the trading market to “risk only what you can afford to lose”. However, due to excitement, new traders tend to risk more capital hoping for a big profit. They forget that the market may go South and against their favor resulting in a huge loss. It is a must to risk only what you have planned as part of your strategy.
Choosing a Broker
Another common mistake is opening an account with a broker who doesn’t fit your trading plan or worst, opening an account with a trading scam. Spend some time researching what the best platforms are keeping in mind if they offer the things you want as a trader. Also, start with a small test trade to find out the overall experience of the platform.
Investing in a Number of Similar Trades
Putting your eggs in one basket is not a good strategy because if one of those pairs doesn’t go your way, the rest will follow. It is best to diversify your trade. This increases your chance of winning or at least earning your money back if another trade goes against your way.
No Research
Timing plays a significant role when you trade forex. Understanding when it is the best time to enter or exit a trade helps a trader to profit rather than lose money. Market research involves time to research charts, news, and other factors that may affect the market and not just base your trade on luck and gut feel.
Trading Based on Emotion
Deciding where you should invest your money needs rational thinking. Being emotional and impatient usually results in a negative result. This also opens other decisions that create more negative experiences in your trading career. Always do your research and stick to your trading plan.
Not Putting Any Attention to The Math
Statistics are boring and gibberish to a lot of people. However, this is very important in forex trading. A simple understanding of the concepts will help you make better decisions that will result in your favor.
No Trading Plan
Having no plan is a big mistake because a plan serves as a guideline on what you should do when a certain event happens with your trading. Strictly following a trading plan sounds easy, but it is one of the most common mistakes that a lot of traders commit.
Using on a Demo Account
As mentioned earlier, using a demo account gives a trader a risk-free feel on how everything works. New traders should use this to their advantage and not get too excited about risking real money.