Have you ever had a nasty streak in your trading performance and could not figure out what went wrong? Instead of allowing anxiety to paralyze you, begin by asking yourself the following questions:
- Am I performing poorly because I am not sticking to my trading strategy?
- Do my feelings affect how I make decisions?
- Has the market changed, and what must I change to adapt?
Depending on your answers, you may have made one of the most common newbie forex mistakes for you. Below is a list of these top 5 mistakes so you can trade with more knowledge and confidence. Read on to learn how to perform better than other beginners.
Five Common mistakes forex traders make
1. Inadequate Training
Blame it on the desire to make a lot of money in trading, but some newbie traders rush into trading real money on a live account without even practising their skills first.
An inexperienced trader can deplete an account faster than you can say “margin call,” which is why we recommend that new traders first open a demo account. This is excellent because it allows you to trade with fictional money. This way, you can gain experience and knowledge without the risk of losing your money!
Moreover, a demo account lets you get a sense of the market environment. You’ll be able to test a broker for free without any commitments. This will help you confirm whether or not this is the right platform for you.
2. Emotional Trading
Even experienced forex traders are susceptible to emotional trading on occasion. This can result from unchecked fear, hope, or greed.
The issue is that these emotions manifest in harmful trading behaviors such as overtrading, trading too large, cutting winning trades, and allowing losing trades to run.
3. Trading Without a (Right) Plan
This is another common mistake beginners make: a lack of adequate planning. Some new traders start their journey with no plan, while some try to copy strategies they’ve seen others find success with blindly. Neither of these options is advisable or sustainable. You will be better off in the long run by taking your time to do proper research and develop your own.
4. Changing Market Conditions
Sometimes, the issue is not your trading psychology but changing forex market conditions. You may be highly disciplined and follow all your plans, but if your trading strategy does not suit the market environment, you could end up in the red.
When this happens, try to remain calm and remember this is simply part of all traders’ journeys. Indeed, ups and downs are unavoidable and normal in trading, so don’t panic.
Another mistake beginners make a lack of initial capital, which usually leads to their demise. Small trading lots are not fatal to newcomers’ accounts but using small and tight stops may be.
This is what most new traders experience:
- They lack the necessary trading knowledge and experience.
- They are not conversant with risk management concepts.
- They undervalue the risks involved in their setups
- This leads to rash and often costly execution.
As with any business, you must ensure that you are adequately funded. Do not try to reduce risk by depositing only a portion of your available trading capital. Fund yourself adequately but use adequate money and risk management.