The forex market has been attracting a lot of new traders lately, mainly because it is more accessible than ever. You can create a trading account and begin trading foreign currency pairs in minutes, especially now that there are so many online trading platforms to choose from. While getting started with forex trading is easy, jumping right in without sufficient preparation often leads to mistakes that could hamper your trading experience. These are some of the common forex trading mistakes made by beginners.
Lacking Knowledge of the Market
Perhaps the most common mistakes which many new Forex traders make is not taking the time to learn about trading Forex. This is an investment strategy unlike the conventional stock market in that you aren’t buying shares of anything. You will not own anything, but what you will be doing is more akin to betting a spread on a football game.
In sports betting, you are often looking at spreads. You may not be betting on a final winning score but on such things as which team will win by how many points, and sometimes in what period of the game. This is the very same idea in Forex, and once you understand sports spreads, you will be able to translate that concept into the Forex market. It’s all about getting the knowledge you need to forecast what currency within the pair will rise (or lose) in value over a stated period of time.
Choosing the Wrong Broker
The forex broker you use will greatly influence the kind of trading experience you can have. Starting with the wrong broker is not only risky, but it is also bad for your long-term profitability in the forex market. Rather than going for the first forex broker you come across, it is better to take some time and find the right one for you.
There are some important things to keep in mind when choosing a forex broker. For starters, you need to know your personal requirements and preferences before you can effectively compare forex brokers and find one that is worth your time. You also need to take things such as the trading platform used, the leverage available to you, and the spread into account.
When it comes to finding options and understanding what today’s top brokers offer, you have resource sites like InvestinGoal.com by your side. Read their reviews, find user testimonials, and take your time comparing brokers and their services. You will end up with a forex broker that really meets your needs perfectly.
Starting Too Soon
The forex market is easy to get into, and forex trading itself is easy to learn. However, you should not rush into the market just because you can. While there are plenty of moneymaking opportunities on the market right now, there are also a lot of risks to mitigate.
Rather than rushing through things and opening your first trading position right away, it is much better to take the time to learn the basics first. At the very least, you need to know more about the foreign currency pairs you want to trade.
For example, you want to be able to determine your trading position based on the fundamentals affecting the currency pairs you trade. At the same time, you need a good understanding of how to use technical indicators to your advantage.
Underestimating Your Risk
It cannot be said enough that a volatile market carries with it a great deal of risk. In fact, that’s also part of the allure of Forex. This isn’t a market for just anyone because it is fast, furious, and volatile. If you aren’t ready to act quickly, you may lose before you have a chance of gaining.
However, this ability to literally ‘think on your feet’ is where that risk comes in. You often will not have time to sit there running the numbers and weighing options. Although you’ve done your homework well and feel you understand the underlying influencers on the currencies you are trading, all that can change at the drop of a hat.
For example, geopolitical influencers can blow up in a heartbeat and all it takes is one oil well in the Gulf to set on fire and that nation’s currency can come tumbling down with the accompanying fear. In Forex, never underestimate your risk and always have money set aside to trade with to recover from a loss greater than you had anticipated.
Trading Without a Plan
Winging it is not how you want to approach the forex market. Trading without a clear plan and objectives to achieve is definitely the worst mistake you can make on the market. You would not know when to pull out of a position and the number of pips you want to secure. That’s dangerous.
Always trade with a clear plan in mind. Even when the market moves in the opposite direction, you know exactly what to do and how to limit your losses. Only then will you be able to hit one successful trade after another and be profitable at the end of the day.
As mentioned before, getting started with forex trading is easy. With these tips in mind, you can now get started with forex trading without making the most common beginners’ mistakes.