The foreign exchange market is reaching new heights of popularity in 2023. It’s highly liquid, extremely accessible, and beginner-friendly, but that doesn’t mean you can start trading without any prior preparations: success is never guaranteed.
In fact, many amateur traders give up on their trading goals once they encounter their first sets of losses on the ever-growing foreign exchange market. Here we’ll examine the most common mistakes beginner forex traders make to help you start your trading journey in the right way.
So, without any further ado, let’s get right to the bottom of it.
1. Not doing enough research.
Entering trades without any prior planning nor goals in mind is a direct way to failure. Young and ambitious traders often go in expecting the market to do the work for them. While you might earn some cash by using blind luck at the beginning of your journey, the success streak won’t last for long. Trading is all about predictions and consistency, and to achieve that, you’ll need to have a detailed plan in front of you. The plan should be crafted from a knowledgeable standpoint and flexible enough to withstand the frequent changes on the market.
We recommend reading guides, watching tutorials, and enrolling in available courses offered by professional trading coaches with experience in helping people build full-time forex incomes. Don’t ignore the latest trends on the market, develop and follow a realistic budget, and learn when to enter and exit a trade. That is the bare minimum, so try to grow your knowledge as much as possible before you even think about accessing the market.
Overall, proper research and focused hours of studying are key to being a successful forex trader. Invest in your education and keep yourself up to date with the current market trends as much as possible.
2. Expecting too much too quickly.
Forex trading won’t make you a millionaire in a day. It’s simply not how it works. It doesn’t mean you can’t succeed, but there’s certainly a bumpy road in front of you. If you’re not ready to take a loss or two while gaining the necessary experience, perhaps trading is not for you. You shouldn’t take mindless risks and invest more than you can afford to lose, but you’ll still have to suffer through a couple of losses if you want to succeed.
So, keep your expectations as realistic as you can. Your mindset is as important as your trading skills and knowledge. If you’re ready to work hard and smart and make investments towards your future, then you’ll certainly become a decent trader after a while. Be patient, determined, and persistent.
Overall, one of the biggest mistakes new forex traders make is that they expect to become a success story right off the bat. Don’t make the same mistakes and try to be as realistic as possible at all times throughout your journey.
3. Not investing in your education.
Being self-taught in Forex trading and achieving success that way is perfectly plausible, but it’s far from being the optimal way to go about it. If you want to learn to trade forex quickly and painlessly, hire a coach and purchase some professional books on trading. It will help you in reducing the trading risk by helping you build consistency while you learn proper planning and strategizing in Forex. You can learn more about these types of opportunities here if you’re interested.
If you’re not ready to take a risk and make investments towards your future, how could you ever become a successful Forex trader? Knowledge and experience mean everything on the market, and you can’t get one without the other.
Lastly, being educated allows you to minimize risks and maximize your profits in an efficient way. As we’ve mentioned before, knowing how to plan your journey is of the utmost importance, and you can only get that by working and studying long and hard.
4. Not choosing a reliable broker.
Choosing a good, well-managed broker can make the difference between losing all of your money or becoming a successful trader. Not all Forex brokers deserve your attention and money, so make sure to do your research and assess all of your options before committing to one.
Look for reviews, referrals, and testimonials online, and don’t hesitate to seek some help from an expert. Unfortunately, as the forex trading phenomenon gets bigger and more accessible to the general public, the number of forex scams grows higher. So, again, be extremely careful and do your research before you choose a broker.
Lastly, don’t be in too much of a hurry. You don’t have to rush your journey: take as much time as you need to choose a broker.
5. Hesitating to cut your losses.
Sometimes things won’t go your way in forex trading. It’s something you should accept from the get-go, or otherwise, you might make the mistake of holding onto a losing trade for too long. It’s always better to cut that loss while it’s still small.
Most beginner traders keep on hoping for a reversal of their losing trade, so they refuse to exit, which in turn only makes their loss bigger over time. We’re not saying exiting a trade quickly is always the best option (quite on the contrary), but risking more than you can afford to lose is never an option.
So, never hold onto a losing trade if the chances of reversal are low. Trade with the trend, not against it, and you’ll quickly see some results.
The bottom line
Forex trading can be an incredible way to earn money, but it’s not for everyone. You’ll need at least three things to become a successful trader: the right mindset, focused knowledge of the market, and relevant experience. We suggest you take your time to learn and prepare much before you start your trading journey. Make a good plan, get a trading coach, and don’t be afraid of failure.
All in all, we hope our article helped you recognize some of the most common mistakes new forex traders make, and we wish you good luck in avoiding them!