Embarrassing Mistakes of Forex Traders
In 2021, Forex is more popular than ever. Lockdowns have accentuated the appeal of remote work. Shrewd traders make money outside the job market. They are their own bosses, and income largely relies on their skills. This financial market is the largest in the world. Still, even now, beginners continue committing the same foolhardy blunders.
1. Disregarding the Demo Mode
The urge to start trading with real money is irresistible to many newbies. This is a monumental mistake. Trading is complex: it requires total concentration and a particular set of skills. You cannot play it by ear.
Competence translates into confidence, not vice versa. Learn the essentials of Trade in Forex — the demo is an essential component. On average, traders spend three months in the simulator. Any reputable broker recommends starting with a free demo account. A company that states otherwise is probably a scammer.
Thus, explore the software and practice managing virtual trades. Build the right skills and habits for thoughtful analysis and careful risk management. Of course, real trading always feels different from the simulator. At the very least, you need to develop the right habits, so technicalities do not distract you.
2. Focusing on One Market
Every investor should aim to develop a diverse portfolio across markets and instruments. Overreliance on a single asset exposes you to high risk. Today, brokers offer a broad selection of instruments beyond currencies.
Of course, beginners do not have the expertise to manage a miscellaneous portfolio. This should be your ultimate goal. If one tool brings a loss, it may be covered by profits elsewhere. After all, no market will move in your favour all the time.
3. Taking Excessive Risks
Forex trading is always risky. The market is affected by a plethora of political and economic events. Traders may foresee, but not program them. As a result, risk management is crucial. Beginners must learn to protect what they have before raising the stakes.
The old principle holds: justified risk is 1-2% of the balance per trade. Remember that foreign exchange may always turn against you, and not everything is foreseeable. A reasonable approach is based on a series of modest profits that accumulate over time. Never increase the volume before you know that your strategy really works for you.
4. Impulsive Action
Trading psychology is a fascinating field. You may be surprised but the concept of mindfulness applies to Forex, too. Human emotions are extremely devious. We tend to become irrational under pressure. This is why brokers advise against trading in strong emotional states like sadness or excitement. You may end up overtrading and depleting your account.
Learn from Other People’s Mistakes
Despite the abundance of information, people continue making the same mistakes. The fundamental rules have not changed since the 1990s. Profit is based on a combination of analytical skills, sharp foresight, and emotional control. Start small, do not risk too much, and follow your broker’s advice.