At least 90% of the beginners who start Forex trading today are most likely not to be around anymore 6 months later. This harsh statistic shows that most beginners fail. If you are a beginner and you don’t want your Forex trading experience to be a short and painful one, you have to work hard, protect your money and avoid these common mistakes:
Mistake #1 – Pursuing impossible returns
Most beginners are captivated with trading for a living on tiny accounts because of leverage in Forex, in which they can trade up to 100 or even 200 times the amount of their money.
However, in reality no one can consistently double up his/her account in a short span of time. Doubling your account in a month is too risky. Sooner or later you will end up losing all your money at once.
The best thing to do is to learn how to trade and protect your money. Pursuing impossible returns or believing that you can trade for a living in a $500 account should be the least of your concern.
Mistake #2 – Trading Without A Strategy
Trading without a strategy in Forex is like a ticking bomb waiting to explode. It is a surefire way to lose a lot of money. Forex traders must establish rational trading strategies before plunging in, these can be developed through learning and experience. You really need to be rational in your decision-making. It comes from technical studies of charts and through plotting out entry and exit points.
Once you gain an understanding of the market and the forces that play behind it, it will become much better to develop excellent trading strategies to gain good profits.
Mistake #3 – Using Too Much Margin When Trading
Margin is the use of borrowed money to purchase securities. Many traders make a mistake by seeing margins as free money. Using margins may help traders gain large profits. However, it is not advisable especially to beginners because it can lead to heavy debts. Margins should only be used in investments if the trader have the ability and the time to carefully watch over his/her trades.
Mistake #4 – Pursuing A Magical System
Most people prefer to spend their precious time and money looking for a magical system that would produce money all the time instead of learning the ins-and-outs of Forex trading. Magical systems do not really exist. Many professionals earn money 60-70% of the time since their average win is much bigger than their average loss. This is the reason they end up in making good amounts of money at the end of the year.
Sadly, most beginners fall on the false hopes of some systems that claim to let them earn money every time and double it within a month. It is always best to study the Forex market and develop your own system on it rather than relying on the empty promises of magical systems.
Mistake #5 – Assuming Instant Profits When Trading Currency At Low Exchange Rates
Buying and selling currency when the exchange rate is low does not automatically result in profits. Making trades based solely on the exchange rate should be avoided. There is a reason why the exchange rate is low. Thus, you should do ample research and examine carefully all the factors that are affecting the dropping rate.
Mistake #6– Thinking That You Are Above Everyone Else
There are people who believe that they can be successful in Forex trading because they are better than those who have failed. They think that they can make good money in lesser effort. In fact, many among beginners that lose money in Forex, are well-educated and smart people.
Believing in your skills is good to start with. However, ignoring the difficulty of Forex and assuming that you are better than everyone else is in the same sense as digging your own grave.
Mistake #7– Being Impatient
Beginners often make a mistake thinking that the more they trade the more they will earn. It is not basically the case. You will earn better by doing the right decision of waiting for the high odds trades. There are successful traders who make 200% or more but trades only at around 10 times a year.
If you can’t hold on being inactive for long periods, then you can kiss goodbye on your dreams of becoming successful in Forex trading. If you want to make money in Forex trading, you need to have patience.
Mistake #8 – Blaming Others By Your Own Mistakes
Most people blame their money losses to their broker, their system and everybody they can think of. There is really no one to blame for but yourself. Good Forex traders are those who can acknowledge their own mistakes and are able to learn from them.
Those are so very good tips. I have been learning about forex for almost 2 years and still there is so much that I don’t know. Some of the mistakes that you talked about I have done but don’t do and some I’m not doing as much as I used to do. I have always been skeptical of trading bots and people selling hopes and dreams, so I decided to take the less traveled road and learn from trial and error. Of course I’m doing this with a demo account.
Thanks for all of the tips.
Abner,
Thank you.
We need to be constantly learning and improving. Unfortunately, sometimes improving can only be done when we make mistakes. But one important step is to acknowledge and learn from them.
Good Luck!