Whenever you do something new, you’re bound to make mistakes because you can’t start out knowing everything. However, when a lot of money is involved, these mistakes can discourage an individual enough to quit the venture altogether.
In forex trading, it’s extremely common for beginners to quit in a matter of months because of their mistakes. Therefore, the key to succeeding in forex trading is to avoid the more common mistakes.
Mistake #1: Not Practicing
You can’t understand everything about forex trading by reading. You need practical experience. At the same time, you don’t want your ignorance to lead to losses in the market while you’re learning.
Unfortunately, many beginners forego practicing with demo accounts, like on ETX Capital, before investing real money. If you devote a few months on practicing, then your chances of succeeding will go up.
Mistake #2: Focusing On Just One Currency Pair
Another common mistake is focusing on just one currency pair. Traders do this because learning about different currency pairs is more difficult and time consuming than just focusing on one.
Trading with just one currency pair can also be riskier because one misstep or unforeseeable change in the market can result in massive losses. In contrast, when you invest in multiple currency pairs, profits from other pairs may compensate the unforeseen loss from one currency pair.
Mistake #3: Being Too Free With Leverage
One of the greatest aspects of forex trading is leverage. With leverage, you can end up making huge profits in the forex market even if you don’t have enough money to invest in it in the first place.
It’s very easy for beginners to overuse leverage to make more profits. However, when you use a lot of leverage, you also increase risks. For example, the ratio with which you increase your chances of making profits by using leverage is also the ratio with which you increase chances of losses. Leverage has place in forex trading but in moderation.
Mistake #4: Getting Too Emotional
Emotions are the enemy of all forex traders and affect them all. However, beginners are less equipped to deal with emotions like fear and excitement. You can’t succeed in the forex market without being objective.
These emotions can end up affecting your decisions to buy or sell currency pairs in the market. If your decisions are based on anything other than your technical or fundamental analysis, then run the risk of incurring losses instead of making profits.