As with any endeavour, being prepared is key to success. One of the most common mistakes made by beginner forex traders is trying to succeed without sufficient understanding or knowledge about the Forex market. Before entering a forex trade, make sure to do enough research and understand how things work. Not only should you be up to date with the latest trends and events in the market, but you should also have a perfect idea and forecast of how these events could influence the market.
Thankfully, there are plenty of resources online, like PU Prime’s own trading tutorials and webinars, that can help you get started. Take the time to understand the lingo, workings, and strategies for forex trading; and try your hand at a demo account before embarking on trading.
forex Trading is a skill and like any other skill, it takes time and a lot of practice before becoming a pro. Consult a professional and investing in a trading education course is definitely advisable.
Because forex traders are trying to grasp as many trading opportunities as possible. Most of them tend to neglect or forget what they were set out to do.
To have a forex trading plan is to have a comprehensive framework that guides your decision making in any difficult trading activity. While a beginner might luck out by trading on instinct and whims, occurrences like that are rare. Having a clearly defined plan with proper entry and exit conditions is important to trading with confidence, and avoiding making emotional decisions. At the same time, be flexible enough to react as the market situation changes – if a trading strategy is not working out, then perhaps it’s time to move on to something else.
One of the most common mistakes made by beginner forex traders is letting personal feelings and emotions, also known as trading emotions, impact their decision-making. Trading emotions are definitely detrimental as it would affect forex traders’ ability to think and make decisions quickly. It could also lead them making impulsive decisions out of fear, greed or bias.
On how to control these trading emotions, it is important for forex traders to exercise a calm demeanor when trading forex and having the discipline to stick to the stop-losses and profit-taking of your trading plan. Discipline is indeed the most important attribute to cultivate, especially in a scenario where greed or bias can often obscure the larger picture. Holding on to losses for too long in the hopes that trends might reverse might result in losing even more of your capital. No forex trading strategy works 100% of the time, treat it as a life lesson and move on.
Part of discipline is also only taking risks that one can afford. Allocating a consistent, fractional amount of capital on each trade will prevent emotional or “gut feeling” decisions like taking on an abnormally large position because you feel positive after a string of wins.
Finally, put in the work. Putting in the effort to follow the news and events; record your activity and review your trades (MT4 has a pretty useful tool to do just that); and doing backtesting with your forex strategy can all have a significant impact on your trades.
Even just having a forex trading strategy is not enough. Some beginner forex traders will constantly chase for the perfect trading strategy that they think will make them large amounts of money. No such thing exists – not for the institutions, and certainly not for the retail trader. Instead, pick one that suits your personality and available resources. This includes how much risk you are able to assume, the amount of capital you have, and how much attention you can spare to monitor your trades.
At times when forex traders are lost and unsure of what to do, instead of relying on the “ultimate” trading strategy for answers, forex traders should also learn to independently seek a deeper understanding of what’s going on and why it happens.
There’s no free lunch in the world. As a beginner forex trader, the potential returns from volatility, like during the announcement of high-impact news, might seem tempting. But volatility means that the forex market might move either way. Avoid trading forex during or right before these announcements like central bank meetings or employment reports. Instead, monitor the situation and wait until the situation calms down a little. forex trading is not a way to make quick and easy money consistently (nothing is). Like running a business, it’s something that requires work, patience and practice in order to have a payoff.
Are You Ready To Start Your Forex Trading Journey?