We all can be wrong from time to time. It’s a common thing for the people who would like to gain experience in any area of life. There are no actions without mistakes. There are no results without actions. Can you see the connection? However, some errors may cost us a fortune. Luckily, we are capable of doing whatever it takes to prevent us from faults at the first steps towards the world of Forex.
We’ve prepared for you a list of popular mistakes beginner traders make in Forex trading. The order is random, so don’t concentrate on numbers, judge the consequences. May the lesson be useful to you.
#1 No preparations
The rather easy entry to the Forex market is the main reason why people have such a light-minded attitude towards the knowledge base essentials for quality trading. They often think that the theory is not a big deal, and the beginners will be able to build it up without a peep. This trick isn’t working at all. The most number of successful traders had started their financial education long before they got moving. Forex is not a school - nobody puts pressure on you, but to show the stable results, you have to understand what you are doing.
Why is it so bad? Without a good base, you don’t know how to produce an adequate trading plan. That inevitably leads to the unpleasant consequences, because you can’t analyze things you probably do wrong.
How to avoid it? Find time to develop your skills. You may work hard without interruptions during the week or do it gradually, e.g., spending half an hour each day during a year. It doesn’t matter which way you choose – you have to study financial theory. Read FBS Guidebook or watch webinars to boost your trading.
#2 Trading without a strategy
A well-thought-out plan is one of the best companions for you on Forex. It makes your way transparent and shows what, how, and when you will trade. It looks like the decision-making scheme, where particular indicators show you when you have to close or open deals. However, beginners often miss this part and enter the market whenever they want.
Why is it so bad? Without a strict plan, you fall into the clutches of panic and fear. It leads you to hasty market decisions, which eventually result in trading mistakes. Intuitive trading may bring you some benefits at first, but if you trade unsystematically, you can lose everything.
How to avoid it? Work out a plan and try to stick to it. Don’t be upset when you are losing trades. Sometimes it’s just a bad day and nothing else. Starting with a simple strategy is always the right choice.
#3 Lack of discipline
This mistake connects with the previous one. Even though you have a trading plan, you also can change your mind several times. It’s not right if there is a sequence of losses that you face. Chaotic movements bring you nothing but regrets. A trading plan is necessary for such periods on the market to prevent you from getting impatient.
Why is it so bad? Letting emotions impact the trading process makes your behavior irrelevant. You start losing your temper as well as your money.
How to avoid it? Try as hard as possible to hold to your trading plan. Make it your routine to work out a strategy and then carefully embody it step by step. Change your plan only at the end of the day when you close all deals and analyze the statistics.
#4 Neglecting risk management
Many beginners know a little about how they can manage risks. They don’t understand what leverage is and can lose money with increased one when the price moves. Avoid stop loss and take profit orders, and miss the winning chance to close deals. Open many positions at the same time that divert the attention. Trade more than they can afford.
Why is it so bad? It is simple as that – without risk management, you may lose all the money. Choose the smart way to stay in the game.
How to avoid it? Develop a positive and strategic approach to risk management. Thanks to it, you are able to prevent losses from getting out of control. Use appropriate leverage, examine the benefits of stop loss and take profit, watch the number of deals and their prices.
#5 Avoid mistake corrections
Each trader, either beginner or experienced one, needs to keep a trading diary, where all the deals, both ups and downs are recorded. It aims to show you which actions lead to which consequences. Only through recognizing faults, you are able to analyze when your strategy becomes irrelevant.
Why is it so bad? If you ignore post-trading analysis, be ready for a short ride on Forex. You can’t make a quality plan for the next day if you skip the part where you see and understand what mistakes you made.
How to avoid it? Keep recording your fails as well as wins to see the whole picture.
#6 Ignoring market events
Don’t deny the importance of relevant market news. Economic events influence the directions of trading during the day. There is no need in trading the news, but it’s essential to be aware of it.
Why is it so bad? If you follow no news, you may skip the volatility these events produce. Another problem is that right after the release, the spread between the bid and ask price is often way much bigger than usual. It makes it hard to find the liquidity to leave the position at the price you prefer.
How to avoid it? Check out fresh news and economic events to be abreast of the latest possible changes and get ready to make moves. Create the strategy, which considers the volatility.
#7 Paying no attention to trends
If you think that you are the only person who knows exactly when the trend changes its direction, we are sorry to tell you that you are deeply wrong. Since you are the beginner trader, let yourself go with the flow – be like other traders making trends.
Why is it so bad? Avoiding trends may have a severe outcome. From the very beginning, you can’t predict if the trend changes its direction Its continuation is much more possible than the change. Trading against the trend is too risky for new players.
How to avoid it? See how other traders use trends in their performances. Act, according to the minimum 4-hour trend, to have a clear vision of the process. And remember that trends are friends.
#8 Wrong timing
Low timeframes demand a quick reaction. Professionals with many years of experience can make instant decisions based on their intuition. Their response is faster than yours, and it helps them to trade successfully during the daytime.
Why is it so bad? Decisions that are made based on intuition are not a smart idea for the newbies with poor trading experience. Low timeframes interfere you from distinguishing day trends. You may miss all good opportunities to succeed in Forex trading.
How to avoid it? If you are a beginner, make technical and fundamental analysis your best buddies.
In this fast-paced resilient world, we can share knowledge and observations with the other traders. That allows us to see widespread patterns in making mistakes and create a stable platform for our future growth. Since we can clarify such models, we find powers to avoid them and accumulate our attention around the more vital questions, which allow us to enjoy trading instead of suffering and floating in enormous losses and wasted time regrets. Bear in mind our advice and trade with pleasure.