Choosing the Wrong Platform
Choosing the right forex trading platform is essential if you want to get to a good start. A good platform should provide good educational resources, access to news and a variety of trading signals. They should also allow you to trade exotic pairs since some brokers can be very limited as to which pairs you can actually trade. You should also know how they’re charging you for trades, what their withdrawal and deposit conditions are, and how good the customer service and actual platform is.
Risking Too Much
One of the most fundamental mistakes newcomers make is risking too much and getting struck by FOMO, or the fear of missing out. They see a trade they could’ve got in and think about how much they would have gained instead of thinking of how much they could’ve lost.
You should make sure that you only trade what you can afford to lose, and this can be different for everyone, but a good rule of thumb is to not spend more than 2% of your total available capital on any trade. While it may seem small at first, it’s the only sure-fire way to limit how much you could eventually lose.
Just look at it this way, if you end up losing 50% of your capital on a losing trade, you’ll need to double your money on your next trade just to break even. That’s just not sustainable, especially if you’re just getting started. Another advantage of only investing small sums is that you’ll be able to stay calm and not lose your cool if you’re in an initially losing trade. That will prevent you from closing positions too early out of panic since you won’t be afraid to lose whatever you put in.
Ignoring Longer Time Frames
Too many new forex traders come in with a day trading mentality and get sucked into short term 1 minute or 5 minute charts. But sometimes, clear uptrends can only be seen on daily, four hourly, or hourly charts. The longer the trend is, the stronger it will usually be. A dip on a 5-minute chart will never be long enough to give you the clear picture on a trend. While some traders do good on short term trades, they require a lot more discipline than long term ones. There’s also much more chance that there will be interference or noise since companies and big institution players use the market as well.
The foreign exchange market can be very lucrative if you know what you’re doing but it is not as easy as many would make you think. Make sure that you do your homework and know everything there is to know about the market before you consider going in.