Trading is not very hard, but if you want to earn money from it, it can be tricky. If some wants to become a trader they should choose the Forex market, because of its volatility. But it’s not easy for an amateur trader to earn money from it because of their own mistakes. Statistics show that 95% of traders lose their money in the Forex market, because of their own mistake. They don’t prepare themself properly before joining this market. We will talk about some common mistakes that a beginner trader makes and how to avoid them so that you can be alert to those mistakes.
Mistake 1: Not enough Forex Education
In the Forex market, not only do you have to invest money to make money, but you also have to invest your trading knowledge. Many people in Hong Kong consider trading as gambling and because of that, they don’t try to gain a proper knowledge of Forex trading. However, a successful Forex broker has to have a clear understanding of the global market, trading strategy and technical and fundamental analysis.
You have to know how financial news can affect the market, and how trading tools work. When you feel comfortable and confident about your knowledge then you should focus on making a perfect strategy according to your trading style. However, when you prepare a strategy you should apply that strategy in a demo trading account. Demo trading is a great opportunity for a new trader to practice multiple strategies and choose one before switching into a live account.
Mistake 2: No risk management plant
Forex trading is a risky profession, so if you become careless in this market the consequences can be very harsh, as Forex trading is related to real money and there is no one who will love to lose their money no matter how much they have. The Forex market is a highly volatile market and because of this it is very risky. Forex is related to the global economy and that’s why the market is never steady. Learn more about the dynamics of the market to manage the risk efficiently.
The market can go against you anytime with the blink of your eye. So the first thing you have to fix when you are joining the Forex market is how much risk you are going to take for each trade. You have to use stop loss and take profit according to that. This is the only way you can prevent your account from blowing up.
Mistake 3: Not sticking to your risk management plan
A trader can have the best strategy in the world and a proper risk management plan, but if he does not follow it he will achieve nothing in this market. Keep in mind that if you are not disciplined then the Forex market is not for you. Traders often do not follow their risk management plan when they are experience a loss or when they feel overconfident about any trade. You have to learn to control your emotions and stick to your risk management rules. Emotions are the main reason for making bad decisions in this market.
Mistake 4: Choosing the wrong broker
This is the most common mistake for a beginner trader. They choose the wrong type of broker most of the time. Before choosing a broker you have understand what type of trader you are. After that, you have found out the broker what is suitable for you. If you want to be a day trader or scalper then you should select a broker that provides tight spread and low commission.
On the other hand for the long term and position traders, they can choose a broker with high spread and high commission. You should also check the broker’s license before investing your money in it because not all brokers you find on the internet can be trusted.
A trader can make mistakes at any time. That’s not a big deal. But if he does not learn from his mistakes then that’s a matter of concern. That’s why we have talked about some common mistakes and how to prevent those so that you can avoid those mistakes and have a good trading career.