Alltopstartups
  • Start
  • Grow
  • Market
  • Lead
  • Money
  • Guides
  • Interviews
Pages
  • About
  • Advertise
  • Contact
  • Homepage
  • Resources
  • Submit Your Startup
  • Submit Your Startup Story
AllTopStartups
  • Start
  • Grow
  • Market
  • Lead
  • Money
  • Guides
  • Interviews
85K

The Most Common Forex Trading Mistakes And How to Avoid Them

  • Thomas Oppong
  • Jul 11, 2019
  • 3 minute read

Trading forex is a skill that takes a lot of time and practice to master, although, there is no way to ever completely eliminate the risks associated with trading. And let’s be honest, it’s the risk that makes it so exciting to trade in the first place.

With that said, there are many common mistakes that beginners tend to do when trading forex, and the more of them you can avoid, the higher your chance of succeeding will be. 

Therefore, we thought we’d share some of the most common forex trading mistakes.

Lack of knowledge and practice

When people first start trading, they tend to be excited and eager to start but diving head first into trading is rarely a good idea. Instead, you need to take the time to study the market, learn how forex trading works, and master a few basic trading strategies.

By doing so, you will substantially decrease the risk of unnecessary losses, and it will set you up for a better trading journey.

Luckily, it has never been easier to find great, and often free, online resources where one can learn how to trade forex. In fact, there is such an abundance of trading knowledge available online that you really have no excuse as to why you wouldn’t study before you start trading.

Chasing losses

One of the most common and treacherous mistakes that beginners make is chasing losses. Some might argue and say that the most valuable trading skill to acquire is the ability to keep your head in the game without letting your emotions take over.

Losses are an inevitable part of trading for everyone, and you need to be able to accept when it’s time to cut your losses and move on to the next trade.

Not implementing a strategy

If you decide to trade without a strategy, you might as well go play on a Wheel of Fortune. Trading isn’t supposed to be a guessing game and trading “blindly” without a strategy is completely useless.

Now, trading strategies come in different shapes and levels of difficulty, and there are several basic strategies that beginners can learn in order to improve their chances of making a profit. 

Ignoring stop-loss

For some reason, many beginners seem to ignore the stop-loss feature offered by any serious broker, and that’s a major mistake.

Activating a stop-loss is often as easy as a few clicks, and it’s also one of the easiest ways to avoid substantial losses.

Underestimating the power of margin and leverage 

Using margin and leverage when trading is a double-edged sword. On one hand, leverage can help improve your profits, and it allows you to trade on even the smallest market movements. On the other hand, leverage can increase your losses at a rapid pace.

Learning how to correctly use leverage for one’s benefit is one of the most important lessons for new traders. 

Keeping all Eggs in one basket

Diversification is not only a good way to protect yourself, but it’s a necessity that should be practiced by all traders. Instead of focusing all your energy on one or two currency pairs, it’s better to spread your efforts out over several pairs of different sizes, i.e. majors, minors, and exotics.

That being said, you shouldn’t spread yourself too thin either. It’s best to try and find a sweet spot where you’re able to correctly analyze the assets you’re interested in without overwhelming yourself. 

Not calculating taxes

Lastly, we have to encourage everyone to include taxes in the equation from the start. In most areas of the world, forex trading is taxed, and it’s your obligation to know what you own the government.

It’s also important to understand that all your profits aren’t necessarily yours so that you separate your money from taxes.

The bottom line

Forex trading can be very entertaining and even profitable for some, but it has to be done the right way. Careless trading is never a good idea, and the more you know, the higher your chances of succeeding gets.

Hopefully, the above-mentioned tips can help you become a better trader, and more importantly, help you avoid costly mistakes.

Thomas Oppong

Founder at Alltopstartups and author of Working in The Gig Economy. His work has been featured at Forbes, Business Insider, Entrepreneur, and Inc. Magazine.

Latest on AllTopStartups
View Post

DropsTab: A Cryptocurrency Market Tracker to Facilitate Your Day-to-Day Crypto Analytics

View Post

Five Basic IT Risks to Avoid

View Post

Does Earning an MBA in Project Management Pay Off?

AllTopStartups
Published by Content Intelligence Media LLC

Input your search keywords and press Enter.