It’s no secret that becoming a successful forex trader can be an uphill battle. After all, we are speaking about a field where reported numbers suggest that 70-90% of those who try fail. While the statistics can seem bleak, the truth is that anyone can profit as a forex trader, but most of those who give up do so because they are making one of these mistakes:
Mistake #1: Not Being Prepared
One of the main benefits to opening a trading account is that it’s pretty easy, as long as you have a device with an internet connection, at least $10, and you’re 18 or older, you could open a trading account right now. However, this is also a downfall for many traders that decide to open an account before they’re truly ready. If you can’t read key indicators, don’t have a good understanding of how the market works, when to trade, how to trade, and other important concepts, then you’re going to be confused once you jump into everything. There’s a lot to learn, so be sure to educate yourself beforehand. Many traders give up because they start too soon and don’t want to put the effort into learning, but it’s important to remember that it takes time to learn to trade just like with any other job.
Mistake #2: Not Having a Solid Plan or Strategy
Let’s assume that you’re educated enough to begin trading, so you open your trading account. What now? You have to have a plan in place that tells you what assets you’ll trade when you’ll decide to enter trades, how much you plan to invest and risk on each trade, and so on. You should also have an idea of a strategy you want to use, like scalping, day trading, swing trading, and so on. If you simply open trades without a plan, then you’re bound to lose. Fortunately, the internet is filled with free resources that can help you craft a plan and choose a strategy. Know that you might have to tweak your ideas a bit as you grow more accustomed to trading, but it’s still important to have a roadmap to follow.
Mistake #3: Risking too Much
Some traders are in a hurry to make money and might risk as much as 10%, 20%, or more on each trade. Doing so can put you on the fast track to wiping out your trading account. Instead, you want to risk around 1-2% on each trade or calculate how much money you’re willing to risk on each individual trade. Losses are inevitable, so it’s better to stick with smaller position sizes and to risk less so that there will be less fallout if you lose. Many beginners start out risking too much and quit once their account shows a $0 balance.
Mistake #4: Being Emotional
There’s a whole host of factors that go into the way that your emotions can affect your trades. If you’ve never researched this before, all you have to do is Google “trading psychology” and you’ll find a ton of information. Understanding the ways that emotions can affect trades negatively is the first step to ensuring that this problem doesn’t affect you. If an emotion like fear or anxiety starts causing you to make bad decisions, you’ll be much more likely to realize this if you’re educated about it beforehand. Then, you can find ways to deal with these emotions rather than allowing them to continue to cause you to lose money.
Mistake #5: Trading When They Shouldn’t
Those that are workaholics might not feel right if they go a day without trading, after all, it would seem as though you’re losing money by doing so. However, there are times when the market just isn’t right for trading, or when it should be avoided, like when big news is scheduled to be released. There’s a saying that trading less is more because of this – so it’s important to know when to avoid trading. In the end, it’s better to avoid trading on a bad day and to keep your balance the same, than to trade and lose money.