The popularity of Forex invites all traders of different levels, from beginners to experts. The global status of Forex now boasts about $4 trillion in average trading volume each day, which makes it the biggest recognized financial market around the world.
Indeed, trading at Forex is easy and accessing it is relatively simple. However, you can also lose money at Forex very fast.
Thus, in this article, we will discuss the common mistakes in trading and how to avoid them so you can stay in check legally.
1. Not Maintaining Clean And Update Charts
For beginner traders, it would be tempting to use all of the technical tools once you have started opening an account. Though such indicators are suitable for Forex markets, always remember to minimize the use of analysis techniques so they will be useful.
For example, if you always use two types of indicators, it can become redundant and possibly give opposing signals.
Here are some of the tips that you can try in order to have a clean chart:
- If you don’t regularly use an analysis technique to improve trading performance, then remove it from the table.
- The chart must be easy to read. Choose colors, fonts, price bars type, etc. which will provide you with an adequate and simple to understand response to the dynamic market.
2. Not Finding A Trustworthy Broker
In the Forex industry, it is possible that you will end up dealing with a less reputable broker.
Due to questions about the safety deposits and broker’s integrity, it is advisable that traders would only open an account with a firm which is a member of the National Futures Association.
Traders must research the following information about the brokers:
- Account funding
- Account offerings
- Amount of leverages
- Initial deposits
- Spread and Commissions
- Withdrawal policies
3. Failing To Keep Good Records
To learn from both your losses and successes in Forex trading, it is best if you keep a trading journal.
Here is some vital information that you need to track:
When your review your journal periodically, you can gain knowledge and feedback which facilitates better learning. Without a journal, failures will likely occur over and over again.
4. Not Ensuring The Safety Of Your Trading Account
It is safe to assume that making money in Forex trading is a possibility, but it is essential to know that losing money in Forex is also possible.
The key to successful trading is proper money management, which can be learned by every trader. Here are some of the tips on how to do it:
- Knowing when to accept losses and gains, and when to move on.
- Using protective stop loss to make sure that the losses incurred will be reasonable.
- Utilizing maximum daily loss amounts, which involves the closing of all positions and not starting new trades until the next season comes.
Some traders have already made a plan to limit their losses. However, it is still essential to protect the profits above all else. In order to preserve the winnings, it is best to use trailing stops and money management techniques.
5. Failing To Research First About Forex Before Engaging
Even if Forex trading is easy, it doesn’t mean that you won’t exert any effort to study the trade. Research and learn about its process to be successful.
Indeed, the majority of the learning will come from hands-on trading. However, you should also study the Forex markets plus other factors such as the economic and geopolitical sphere that can affect the trader’s currencies.
Create the habit of continuous research about Forex trading while developing a trading plan to be prepared to the dynamic market conditions, world events, and regulations.
6. Not Making Use Of A Practice Account
Start with a practice account, demo account, or a simulated account. These will enable you to place hypothetical trades even without a real and funded investment. Also, practice accounts can help you learn more about entry techniques.
Using a trading account right away can damage your position. Multiple errors can cause loss of significant and unprotected trades. They can also give you stress and make you emotionally and physically drained.
7. When Going Live, Failing To Start Small
Once you have started researching, having a practice account, and making your trading plan, then it now best to go live. It is best if you start small in trading real money since you are just practicing everything.
When the trading goes live, you’ll understand factors like slippage and emotions. For example, if your plan has performed excellent in backtesting, it may fail when you go live.
If you start small, you can evaluate your emotions and trading plan. With this, you can have a chance to gain more without risking the entire trading amount along the process.
In a nutshell, the Forex market around the world can attract many traders due to its natural trading, low requirements, and high chances of leverage. If you do this as a business, it can be rewarding and profitable.
Thus, traders can avoid losing their money if they educate themselves, apply smart techniques, and approach Forex trading as a business. Hopefully the above-mentioned mistakes will give you something to think about and avoid. Being aware of the mistakes beforehand can help you determine how to approach Forex trading in an appropriate manner in order to stay in check financially and legally.
If you would like to know more about the legal aspects, you can seek the guidance of a registered lawyer in your area.
Kiren is a estate law writer who enjoys writing about subject in relation to real estate and law. He has written for a few blogs in the past, and enjoys sharing his knowledge with those who enjoy reading. In his spare time he enjoys spending quality time with those he loves.