“The goal of a successful trader is to make the best trades. Money is secondary.” –
Forex market is among one of the most popular and accessible financial markets in the world. There are millions of Forex investors trading online, but only a few truly achieve success. The pitfalls in forex trading are similar to the traditional asset markets. The risk quotient is considerably higher in the forex market and it is not suitable for passive investors. Forex trading requires an in-depth research of the market and the capability to anticipate every move of the market.
What are the common mistakes made by Forex traders?
If you are planning to start with Forex trading, here are some important mistakes that you should avoid at any cost.
- Lack of Trading Discipline: The minute you allow your emotions take over your trading decisions, you start losing money. In trading, it is all about making maximum successful trades while minimizing your losses. Subsequent losses can have a huge impact over the decision-making power of an investor. It requires a high degree of confidence and patience to endure these losses. Many investors ruin their fortune because of anxiety and fear. You need to develop a trading plan and stick to it while trading.
- Lack of adaptability according to changing market scenarios: Trading market experience several vicissitudes (ups and downs). The key is to prepare yourself for every possible market scenarios. Every time the market changes, it offers new possibilities and risks. You need to modify your trading strategies to confront the market changes. It is best to lower the surprise factor by considering every possible scenario.
- No Trading Plan/Strategy: A plan is the first step towards trading success. Prepare a trading plan that explains risk management and offer an estimate of your expected ROI (Return on Investment). Without a trading plan, you put your investments at risk and you cannot achieve phenomenal returns on your investment.
- Trial and Error Approach: Unlike other industries, you cannot follow the “Trial and Error” approach in trading. Forex trading involves large investments and being a new trader, you cannot sustain consecutive losses. The best way is to learn from the experience of others. You should choose to trade under the supervision of an expert trader. You can also choose trading courses to get a better understanding of the market. Some rookie traders shadow their trading stars to gain a better foot in the trading market.
- Unrealistic Expectations: If you are hoping for a get-rich-quick scheme, forex trading is not the perfect option for you. Forex trading involves practising your strategies and making efforts to stay profitable in business. Most of the new traders end up with massive losses because of unrealistic expectations from the market. You have to follow a risk management and money management strategy for successful trading.