Foreign exchange trading currently stands as the world’s most used financial market, with its vast accessibility and availability making it a popular trading option. Whether you’re new to the scene or you’ve been trading for a while, it’s important to be aware of the most commonly made mistakes of FX traders.
Here are some of the main mistakes traders make in the FX market and what you can do to prevent making them yourself.
Misconceptions about Profits
A lot of new traders get started with the idea that they’re going to get rich overnight. However, FX trading doesn’t work this way, and it’s important that you accept early on that losses are an inevitable part of trading.
A large misconception of any financial market trader is that trading is going to quickly turn them into a millionaire. The honest truth about FX is that nothing is 100%, as so many different factors can inflict instant change on the market. With FX trading, your profits are going to be slow and gradual. Big profits are only made through trial and error, considered strategy, market analysis and thorough evaluation.
Panicked Decisions and Lack of Preparation
Many traders make the typical mistake of rushing into their exchanges so they can make quick money. While this can be tempting, it’s seldom beneficial. As you trade, it’s necessary to be patient with your decisions and even more patient when developing a strong trading strategy. Lack of preparation is the number one contributing factor to failure in the FX market.
There are a number of ways to get yourself ready for the market. Beyond trying out a practise demo account and researching as much as you can on trading strategies and behaviours, it’s also important to recognise that FX trading is partly emotional. Many traders fail to understand that sitting down to trade can bring on a range of different emotions. If you easily feel anxious, it makes sense to tailor your trading strategy accordingly.
Choosing the Wrong FX Broker
One of the biggest and most disappointing mistakes to make in the FX trading game is choosing the wrong FX broker. A trader’s success relies on two things: their own trading strategy, and a good trading platform to utilise it on. If you choose an FX broker with a poorly designed website, unresponsive customer care and a bad reputation, you’re unlikely to succeed. This isn’t just detrimental to your trading success – it can also be exceptionally disappointing to lose money because you haven’t checked whether the FX broker is credible.
Ensure that you look for all of the necessary regulations and licenses before opting for an FX broker. A reliable FX broker won’t have a problem offering you proof of their credibility. Ask yourself whether they offer an easy to use platform and provide access to useful information when you need it.
On top of their reputation and communication, look into their spreads and leverages and compare them to other FX broker providers. Ensure they’re realistic and competitive, and remember – if it’s too good to be true, it probably is.