4 Forex Trading Mistakes to Avoid
The forex market is one of the easiest financial markets to invest in today. You don’t need a special account or a lot of money to start trading forex. Unlike the stock or commodity market, the forex market is also relatively balanced; you get a healthy ratio of risk and return.
Getting started with forex trading is easy. Entering the market too soon, however, is still a mistake. While you can open a forex trading account and start investing within minutes, you shouldn’t. There are things to learn about the market, starting with common trading mistakes to avoid.
Jumping Head First
I know how tempting it is to start trading immediately and begin making money in the forex market. I did exactly that when I first started. Was I successful? I blew through three deposits of $2,000 each before I stopped myself.
Jumping headfirst into the forex market is not the way to go. Instead, you want to ease yourself into the market. Open a demo account and begin trading forex pairs as a way to get familiar with the market and to test your strategy.
Trade on Instinct
Trust me, no one is THAT good. Even the most successful traders rely on technical and fundamental analyses to make good trades in the market. The market is more volatile than ever, so you have more opportunities to make money and higher risks to manage.
Trading on instinct is a big no because it also means you don’t have a plan in mind. What you want to do instead is enter every trade with a target profit and a calculated risk. This way, you always know when to exit a trade.
Trade Against the Market
Another tempting thing to do early in your trading career is going against the market. Not setting a stop loss and allowing an open position to stay open when the market moves against you are, for lack of a better word, exhilarating.
The market will eventually turn, and you will make money from the trade, right? Well, not really. Most of the time, you’ll get margin-called and lose most (if not all) of your money. That’s certainly not how you want to approach the forex market.
Go Straight to Strategies
Going straight to advanced strategies and tactics is another common mistake, but it is a mistake that you can avoid easily. You just need to take your time and cover the basics, no matter of easy or mundane the basic topics may be.
You’ll be surprised by how much you can actually learn from reading InvestingGoal’s article on how buy long and sell short works in forex. InvestinGoal also has a lot of resources on forex basics to help you master the market, plus some advanced strategies to get into.
The forex market is filled with opportunities to make money, but it is also filled with risks to manage. By avoiding these four mistakes, you are taking active steps towards managing your risks and maximizing your chances of succeeding as a forex trader.