This article covers the common mistakes made by newcomers to the foreign currency exchange trading market.
Beginners often find the foreign currency exchange trading market to be very frustrating. They feel that they are trading as they have been taught, they are heeding all the rules of forex trading, but they still do not seem to be moving ahead to a profitable situation.
New traders in this market often make a few common mistakes. If you fall into this category, you are not alone. There are many new traders who find themselves in this situation when they commence live trading.
The first mistake most newcomers make is to think that they will become wealthy overnight. They fail to implement suitable risk management plans and tend to increase their risk levels in an attempt to make huge profits quickly. Risk management is one of the most important aspects of this type of trading. Most experienced traders will suggest that you not risk more than 2% of the amount in your trading account on a single trade. This may limit the amount of profit you make, but in turn also limits the value of losses you may experience.
Risk to Reward
You should consider reviewing your forex trading strategy as that may be where the fault lies. Your strategy should give you the opportunity to make profits rather than suffer losses. It is necessary for your risk to reward ratio to be specified and exact. Many traders have excellent strategies, but they constantly suffer losses because of the level of the risk to reward ratio. A suitable strategy should allow your winning trades to be left to run while they are moving in a positive manner, but to cut your losses before they run too long and become too big.
No-one likes being proven to be wrong. Most people ignore the fact that their decisions may have been flawed. To make sure that you do not become one of the statistics, you should make time to review your strategies, check the methods you use to place your trades and check the point of exit for your trades. You should maintain a trading journal which indicates your successful and unsuccessful trades. This gives you a working diary to check where you went wrong.
Trading Forex Live
Newcomers to the market are keen to commence trading and their impatience prompts them to enter the live trading arena immediately. This is an extremely dangerous method to enter this financial market and you would be putting your funds at risk. You should not enter the live trading arena until such time as you have experience in the trading world. To do this, you should open a demo account. This will allow you to become familiar with the trading platforms that are available which will prevent you from time wasting when you eventually move on to live account. You should continue trading in your demo account until you feel confident enough to enter the live trading world. At that point you should be showing consistent virtual profits.
Foreign Currency Exchange Leverage
Leverage is the reason why so many newcomers enter this market as they see it as a method which will allow them to become millionaires. It is possible to make huge profits with the use of leverage, but leverage could also be the reason for the loss of all your funds.
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