The forex trading market is both a very volatile one and a potentially lucrative one. Even the most experienced and qualified traders experience dramatic ups and downs when trading. What sets the best traders apart from the beginners is that the experienced traders know how to manage their bankrolls and weather the storm. Let’s take a look at some of the main reasons that new traders find themselves struggling.
Relying on Trial and Error
Beginners are, by definition, inexperienced, and that inexperience can be costly when you are trading with real money. It is not a good idea to rely on trial and error when getting started with forex trading. Instead of using an expensive real money account, start with a practice account and trade with fake money for a few months to see how you do. Don’t commit real money until you are sure you can afford to, and you are getting consistent results with the demo account.
Choosing the Wrong Broker
The forex industry is not regulated as strictly as many other investing industries, and this means that there are many disreputable brokers out there. When looking for a broker, be sure to check who they are registered with, how long they have been trading, and what kind of reputation they have online. Note that the Commodity Futures Trading Commission offers some useful tips and advice about consumer protection that may help you find a good broker.
Not Learning the Platform before You Trade
Before you experiment with forex trading, take a moment to check out the fantastic courses offered by Wealth Within Institute. This will familiarize you with the trading platform and help you to avoid many common trading platform mistakes. Forex trading is a complex venture, but it is possible to succeed if you are diligent and systematic in your approach.
Trying to Get Rich Quick
Forex trading is not a good get-rich-quick scheme. The only way to succeed is to be in it for the long haul. Don’t get greedy and hold on to currencies too long, and don’t over-commit to individual trades. It’s better to earn a small amount each day than to end up on a rollercoaster of gains and losses because you trade too emotionally.
Not Having a Plan
Following on from the previous point, the best traders have a sound plan. They know how much they can afford to invest and they trade accordingly. They understand how margins and leverage work, and they calculate their stop losses to make sure that they don’t lose too much on a single trade. Even more importantly, once they have come up with a plan, they stick to it. Greed is a huge issue for many beginning forex trading. Even if you are normally a balanced and rational person it is easy to be tempted to commit more money on a “sure thing,” or to ignore your take profit order because you are convinced that the currency is going to keep on climbing. Do not make those mistakes.
Image credits: FreeDigitalPhotos.net/Stuart Miles
Source: http://www.cftc.gov