Novice traders tend to make one or more of the enclosed mistakes and they lose their money quickly. These mistakes need to be avoided at all costs, so let’s take a look at them…
Forex trading can give you massive profits if you do it correctly but making profits is not easy; that’s why 95% of traders lose money. Anyone can learn Forex trading and win though, if they don’t fall for mistakes and get a good Forex education.
1. Following a Forex Expert
If you really think that you can get rich by following a cheap bit of Software and make no effort, you are going to lose. There are many get rich quick Forex Expert Advisors and robots which claim they will lead you to currency trading success but if Forex trading was as easy as paying a hundred dollars or so and getting an income for life, everyone would be rich!
Forget the easy money message and understand that if you want to make money in Forex trading, you need to learn skills and put in some effort.
2. Over leveraging
I see brokers who offer leverage of 200:1 or more and traders think that to make money, they need to leverage up their investment by the full amount given to them. These traders don’t understand the impact of volatility and soon get wiped out. Any trader should use leverage cautiously and as a general rule use 20:1 leverage or less.
3. Trying to Predict Price Movement in Advance
No one can predict where markets are going to go and prediction is really just guessing. If you do try to predict prices, your predictions will end up as accurate as your horoscope.
Forex prices move to probabilities not certainties and instead of predicting, you should simply trade the reality of price change. A great proven way of doing this is to use a breakout methodology which should be an essential part of any Forex trader’s education.
4. Not Trading with Discipline
Most traders have heard the word but don’t understand how important it is and it’s vital when you’re facing a period of losses. Don’t believe you won’t encounter a period of losses which lasts for weeks, the best traders encounter them and you will too.
When you are losing, its important to keep your losses small and keep following your system with discipline. This is not easy, when the market makes you look stupid, your ego is hurt and your emotions are getting involved. Discipline is based on confidence and an understanding that you must preserve equity in these losing periods at all costs by, until the markets move in your favour and you start making profits again.
The above are mistakes you can easily avoid and if you avoid them and get a good Forex education, you can enjoy long term currency trading success.