Trading in the Forex market is not always easy. Even after you learn all the basic Forex terms and strategies, you may fail tremendously just by making some silly mistakes. Most of these mistakes happen because of a trader’s lack of concentration.
Whether your knowledge of finance rich or not, you should invest time to learn about the mistakes of the novice traders and keep yourself away from those silly mistakes. Let’s discuss some of the common mistakes frequently found among rookie traders.
1. Selling in a Panic
Simply, this is one of the most typical mistakes newbies make. They get cold feet and stick to their losing trades for days, weeks, or perhaps even months. Eventually, they close their trades in a panic when the loss is at maximum level. Fearing is like all falling knives, devastating for your trading career. No one can expect to get the best outcome while drowning in the ocean of fear.
Most of the time, fear sabotages trader’s actions by making them confused about the situation and motivate them to take the wrong decisions. There is no reason to be fearful about losing trades. Losing trades are inevitable and you can easily solve this problem by embracing managed losses.
2. Not Being Flexible
Many investors adhere to the basics rules after executing the trades. They think they should hold on to their assets even though the reason is signaling that they should close the trade. Being entitled to some short-term defeats may be a crucial skill for investors, but they still need to be prepared and know when to sell.
Professional traders don’t entitle themselves to any situation or trade. They know change is the only constant in the Forex market. You have to be flexible with your actions. Think about the IPO industry. No one knows how news factors are going to affect the stock price. But once some news is released, everyone pays attention to that data and scales their trades accordingly despite having strict rules.
3. Putting all Eggs in One Basket
Another prime mistake most newcomers tend to commit is to buy a contract using all their balance. It’s analogous to keeping all the eggs in just one basket. It should never be done.
Whenever a trader invests all his available in one single trade, he sets himself at the risk of being bankrupt. People should round out their contracts with investments in several industries and locations. In short, you have to learn to diversify your portfolio to minimize the risk.
4. Over Diversifying
As you are not dealing with a fixed set of assets, as you have the options to deal with different instruments. It is highly possible to extend your portfolio by investing money in different sectors. It means even when one of your trades is thriving, you are looking for the trade signals in different assets. But by doing so, you are over diversifying your trades which can result in a big loss. Always keep things simple as it will make the process of trading much easier.
5. Not Keeping Expectations in Check
Many have suffered and are suffering from this disease. The moment a trader sets foot in the Forex market, some pre-defined ideas pollute their mind. An investor should know that anyone that tells him trading Forex is easy is not entirely correct. Always remember, no such thing as a “free lunch” exists in this world.
The actual market is not only severely competitive, but it also has an unimaginably harsh. Even a small amount of profit or fortune earned from the Forex market should be received with gratitude.
6. Not having knowledge on time frame
The Forex market gives a trader opportunity to trade in several timeframes. Each timeframe requires a trader to approach the market differently. Before choosing a timeframe or strategy, everyone should know lots about it.
So, these most common blunders newcomers are very likely to do. By avoiding them, anyone can become great traders. If required, read this article again so as to make sure you are not making any of these mistakes in real-life trading.