The forex market is one that attracts many to it. However, it is quite unfortunate that many that take up forex trading do not succeed in the longer term. However, it is also true that some of those who take up forex trading are huge successes. Therefore, in this context, if we understand why some of the forex traders fail, we could perhaps find a place in the group of a minority of runaway successes.
This article tries to reveal some common mistakes that forex traders tend to commit. These hopefully can guide the new entrants into this field along the right path.
#1: The hype created around the forex market is too much
As the profitability in the forex market is high, there is a lot of hype and glamour associated with entering the forex market as a trader. However, the hype is such that the ‘reading between the lines’ is always missed. One can make loads of profit by trading in the forex market, but there are no free lunches. One has to work very hard to generate profits. There is no other magic that is possible. Market.
Technical indicators do give a hint about what is to follow in the forex market. Nevertheless, one cannot be 100% sure about anything. As the wise saying goes, the profits come only to those who wait. So it is a good idea to learn and understand the basic rules of the forex market, put in a lot of practice and only trade once you know how to handle the forex market. If you repeat these things enough number of times, it is predictable that you will take the right decisions and there is a good chance that you will succeed as a forex trader.
#2: Most people like to take shortcuts
Any person that is employed full time in a job is on the lookout for any extra money that will come in an easy way. This is the reason why many feel that good profits from the forex market can come to them easily. This is a completely wrong notion. Whereas it is true that forex can be traded from within the comfort of your home, it is not guaranteed to pour in the profits unless you have learned the tricks of the trade. Buying forex by spending money is an easy task. The act of trading is also simple and easy to learn. However, it is not easy to sense the tide in the market, sell the dollars and earn the profits. Lastly, a trader requires sound knowledge, sheer discipline and patience to reap the profits from the market. There are no shortcuts whatsoever to this.
#3: Many newbie traders like the ‘high’
For many new traders, it feels good when they trade large sums of money. This emotional high is sometimes addictive. If this is what you liked about the forex market and it is the singular reason why you entered this trade, then you should be ready for a nasty surprise. This is the most expensive rush you will ever get and the most short-lived one too. Trading large sums of money is as highly risky as the sum itself. The bare fact is that excitement alone should not drive you to trade forex; other emotions too come in hand in hand and can be devastating. Therefore, it is best to leave emotions of all kinds before you start trading. There should be no room for any of them.
#4: Traders have little self-awareness
Forex trading is not a passive experience in any sense. It creates an upheaval of different emotions akin to the highs and lows of a roller coaster ride. If these ‘one too many’ emotions occur too many times during the trading, the effect is likely to be detrimental: both on your financial and mental health. In the light of this, it is a good idea to know about yourself well before starting to trade in forex. You should know how each of the emotions will affect you. As an example, stick only to day trading if you are one who will get anxious about leaving your trade open overnight. It is best for you to trade in a manner that suits your personality.
#5: Wrong notions about how forex trading is learned
Any person would hesitate to buy a costly diamond without knowing much about it. The same is the case with forex trading. Do not invest large sums of money in the forex market without having studied as to how to get back that money in the least. Some amount of diligent study is required before you throw your hard-earned funds into the forex market as an inexperienced trader only to lose it forever. It is not for you to choose between fundamental analysis and technical analysis, but to use both to your advantage in the forex market. For this, you have to understand and learn to apply both in the market at the right time.
As a trader, you should understand that a forex trader never stops learning. Every time you trade, it is a new experience that teaches you something valuable. Anybody who thinks that they can trade successfully with only superficial knowledge and make huge profits, they are very wrong and are likely to get badly knocked around.
Wrapping up, forex trading is best treated like any other discipline. One has to go through the grind of a medical school to become a doctor. The same story is true for becoming a successful forex trader. It is important to learn all aspects of forex trading before sinking your money in the market. Another important factor that determines the success of a forex trader is the experience. It is always important to improve your trading skills with practice, practice and more practice. Applying all of these principles diligently every time can bring to you the huge profits that you have always wanted out of forex trading.