Forex Newbies – Forex Academy

Let’s be honest with each other, we have all made some silly mistakes when we do something for the first time. This is certainly true when it comes to forex trading. We have made a number of mistakes and when we look back at them now, we can see how silly some of those mistakes were. We also aren’t alone, many people are making the same mistakes that we were back then. They can be easily avoided, but you need to know what they are first. So we are going to be looking at some of the things that traders should not be doing when they first start trading the forex markets.

Trading Too Soon

Many new traders are excited about actually placing their trades. The problem with this excitement is that it means that a lot of traders do not actually learn enough before they decide to place those first trades. They learned the basics, what a trade is, and how to put it on, but that is about where the learning ended before trades have been placed. The problems that you will not be using a proper strategy with proper risk management, and so you are taking a lot of risks by placing trades too soon. Instead, you need to ensure that you know what you are doing. You need to have a strategy in place that will tell you how to place your trades and you need to have risk management in place in order to ensure that your account is protected and that you won’t be losing too much of your account balance with a single trade that goes wrong. Take your time, there is no need to start placing trades as quickly as possible.

Diversifying Too Early

There are a lot of currencies and a lot of assets available to trade, the variety is great and can really help us to be profitable as we can always find something to trade. There are however downsides to it, each and every currency and asset behaves slightly differently and is affected differently to real world events and news events. So there is a lot to learn. What a lot of newer traders do is that they start to pick a lot of assets at once and try to trade them all, this can be really confusing and ultimately overwhelming as you cannot learn about all of them at the same time. Instead, it is always recommended that you take your time to learn a single currency or asset at a time. Learn everything that there is to do with it, master it, and only then should you look at trading another asset. Of course, just one at a time until you learn all that there is about it and then another. Continue like this and it will help to keep you from overwhelming yourself or getting mixed up between a number of different currencies or assets.

Not Continuing to Learn

Forex is ever-evolving. Things are always changing. The markets are always changing and what you need to know is always changing. There is also an incredible amount of information, so much so that not a single person will know everything about everything when it comes to trading. So it is always a mystery why some people think that they do not need to learn anymore, and this is more often than not those that are newer to trading. They have learned their first strategy, they have placed some winning trades and so they believe that they know all that they need to know. You need to keep learning though. Every day you can learn something new, as soon as you stop, the market conditions will change and this will basically throw off anyone that is not learning anymore. They will not know how to adjust in order to match the markets and so they will begin to make losses. One major rule of trading is that you never know everything, you need to always be on the lookout for new things to learn.

Devoting Everything to One Trade

Something that newer traders don’t necessarily take as seriously as long term traders do is risk management. What we see a lot of traders do is to place trades that are far too large for their account size. This can be due to a lack of understanding, or it can be due to the fact that they want to make more money or that they are desperate to make more. Either way, it is not a sensible thing to do and it will ultimately only lead to losses or even completely blown accounts, especially if they are not using the proper risk management techniques in their trades. It is always better to trade too small than too big, at least that way your account will be safe should the markets turn against you.

Trading Too Much

Another thing that a lot of new traders do along with placing trades that are too large is to simply place too many trades. Whether or not someone is using a strategy for their trades, when you begin to place a lot of trades it can only lead to disaster. When we place a trade we use up a little bit of our available margin, as we place more we use more and more up, as we begin to use up a lot of it. It won’t take much for the markets to move against us and for the account to blow. We will also be placing trades that may not be considered as good trades, trades that are on a hunch or that are not in line with any strategies, we need to avoid doing these. More is not always better, you need to place trades that you are more sure of, rather than lots and hoping for more wins than losses.

Not Using Stop Losses

Stop losses are amazing things. These can be set for each trade. When the markets reach that level they will automatically close the trade at a loss. Why would we want to close a loss? To protect our account. If you do not use them, then a single trade could potentially blow an account. The stop losses are there to ensure that we only lose what we are prepared to lose on that single trade. Any more will be prevented which is how a trader remains profitable, by controlling how much they lose with each trade. Yet we see a lot of newer traders trading without them. Maybe they do not know about them or fully understand the importance of them, or some just don’t want to as they do not want to lose. Instead, they hold trades until the markets turn, if they turn. This is dangerous and not something we would recommend. Always use stop losses when trading,with every single trade.

Those are just some of the things that newer traders do not seem to do. There are, of course, other mistakes that are quite common. Consider whether you did or still do some of the things mentioned above. If you do, what do you think you can do to help change this? Try ad work on your trading to take out some of these things that you probably should not be doing.

Getting started with new things is often the hardest step, and it is no different when it comes to trading and forex. People can sometimes find it hard to actually place that first trade or to deposit that first bit of money. There are be a number of different things that are stopping you from starting, from your anxiety, to simply not liking the risks that are involved. We are going to be looking at some of the reasons why people are afraid of starting the whole trading process. We will also look at some of the things that you can do to try and get that jump-start and to actually start trading.

Jump In

Honestly, it may not sound like the most helpful advice, but sometimes you just need to just jump in with both feet. This doesn’t mean be reckless. Don’t jump in and throw your money about, simply get that first trade placed. Yes, you will need to do some learning beforehand, or analyze the markets for potential trades, but getting that first trade out the way will seriously help with your anxiety about placing those trades. It will also give you an idea and feel of what it is that you are doing and how it actually works first hand rather than just from what you have previously read about.

Use A Demo Account

One way of getting around the fear of putting on some trades is to practice doing it. You can do this on a demo account. The majority of brokers will have this service available to you, all you need to do is to sign up for the demo account. These accounts often have the same features and trading conditions the live accounts so they are perfect for testing out your strategies and just simply getting used to trading. Do not worry about using the demo account for an extended period of time. Use it until you are ready to go live. This could be a week, a month, or even a year for some people, but use it to get used to it until you are confident about how things work and that your strategy is effective.

Use Money You Can Afford to Lose

As with anything when it comes to money, you should only use money that you can afford to lose. What this means is that you need to imagine that any money that you put into the account is automatically lost, imagine that you will never see that money again. How Does this make you feel? If you are just a little annoyed then that is fine, but if you are now worried about being able to pay the rest, or that you are going to have to cut back on things then you should not be trading with this money. If losing it will affect your life, then you need to avoid trading with it at all costs. Only use what you can afford to lose, that is a saying that will be around for as long as money exists.

It’s Complicated, But Not Too Complicated

Trading can be complicated. There is a lot to learn and it can be incredibly overwhelming. In fact, we were in the exact same position at the start of our trading careers. There’s so much info out there that it can make you want to simply give up as it can confuse you as to what it is that you actually need to do. Do not worry if you are in this same situation. Take your time. There is no time limit on how quickly you need to learn things. In fact, you can take as long as you need. Go over one subject at a time, learn what there is to know about it, and then move on to the next. As you begin to learn more and more it will all begin to fall into place and it will start to make sense for you. Of course, there is still a lot to learn, and it is still complicated, but it will start to become clear the more you learn, and the more you begin to understand it.

Too Much Risk Is Involved

For many people, risk is a voodoo word. It is something they do not want to think about and something that they would want to avoid. This is perfectly understandable. Afterall, with risk can come loss, however on the other side, with risk can come rewards. That is why we set up strict risk management plans. These plans outline what we will trade when we will trade it, and how much we will trade. It also tells us the maximum loss that we can have with each trade. If you are worried about putting your money at risk, know that you’ll have these plans in place which will prevent you from losing everything at once. In fact, you can set it up so that you only need to win 25% to 30% of your trades in order to be profitable. This is all done through your risk to reward ratio, which is part of your risk management plan. Ensure that you have this in place before you start trading and you will be in a good position.

Plan Your Trades – Plan Your Losses

Fear and being afraid of something is all about your anticipation that something will go wrong or that something bad is going to happen. In the case of Forex trading, this is often the fact that you can lose some of your money. What we need to do is to plan for these losses. It sounds strange saying that we are going to plan for them, as if we want them. Of course, we don’t, but we know that they are going to happen at some point in the future. The very near future. Losses are a part of trading, all traders experience them, even the best in the world. What they do though, is that they plan for them, they know that the losses are coming and so they limit the damage that they cause. Within our risk management plan, they have their risk to reward ratio that we mentioned before. Those prevent the losses from being too large. Some go for a max 1% loss, which means you can lose nearly 100 trades in a row before busting out. Others a little more, but that means that even though you have made a loss, it is small, and a single win will bring you back to breakeven or even profit.

We understand that it can be hard to get started. As we mentioned, starting is often the very hardest part of it. Once you have your first trade and you understand what you are doing, those worries and anxieties that you had about trading will fly out the window. You will have confidence, you will know what you are doing and you will be able to trade more and more. It is simply getting started that is hard, but push yourself over that hurdle, and you will be on your way to a new career in forex trading.