The foreign currency market is one of the most accessible financial markets in the world. Yet while there are a lot of investors, a lot of them are showing losses. 100% of investors intend to make a profit when they open an account. But for that, they must have a strict discipline of investment and especially learn to avoid mistakes. Let’s see how to avoid some mistakes that make many Forex traders fail.
1. Set long-term objectives
Taking a series of losses is never very pleasant for anyone, and especially not for a trader. You have to set long-term objectives, adhere to strict investment discipline, use risk control instruments, and above all, plan ahead. “To fail to predict is to plan to fail,” says the American proverb.
2. Find a reputable broker
As an enthusiast who wants to plunge into the world of trading, you must be careful. Especially when choosing the broker, you are going to entrust your money to. That’s why you need to find a regulated Forex broker and avoid the unpleasant surprises in the form of Forex scammers. They can make your trading experience a nightmare.
3. Adapt to the Forex market
Having a plan is good. Sticking to it too long when market conditions have changed is going straight into the wall! Every day, the day trader must develop a market scenario and put in place the instruments that will allow it to be applied. But the plan is not immune to an external event, which can call into question the markets’ direction. This change should make it possible to set up another scenario. The markets evolve and each time open up new prospects for gains (and losses, alas). Therefore, you must always have an alternative scenario, an exit solution, or a stop loss!
4. Learn from your mistakes
When traders have experienced several successive loss sessions, they are more inclined to change their approach than those who have not yet lost “enough.” The problem is that with Forex, and above all, its leverage effect, the losses that a trader can suffer can cost him very, very dear. The best way to avoid this is to learn from other traders. In some cases, the novice trader can be monitored by an experienced trader, who will guide the beginner in honing the strategy.
5. Don’t confuse lottery and Forex
Forex is not, as some people claim, a get-rich-quick way. It’s not the lottery either. Luck has little to do with it. By seeking to obtain returns well above the average, traders risk, above all, collecting margin calls from their broker and a dry account in a few weeks! We must always seek the balance between profitability and risk and avoid too acrobatic set-ups based on “borderline” scenarios. There are risk management rules for this.
6. Don’t neglect risk management
You have to be as interested in risk management as in the development of your investment strategies. It is necessary to set up stop-losses at each stage of your trades. The trader must always be able to know what is the share of risk in each of the trades. And the greater the capital, the more this risk management must become a priority.
7. Use leverage moderately
It’s the first temptation of the beginner. Since Forex allows you to play on different leverage effects, it can be tempting to maximize your profit by using the maximum leverage. Tempting but very dangerous because leverage significantly increases earnings, but it can also dramatically increase losses. Some sites offer leverage of up to 400. In their case, the risk becomes so enormous that it is better – at least at the beginning – to refrain from trading with too high leverage.