5 Things NOT to Do When Trading Forex
If you know what you are doing, forex trading can be highly lucrative. When you do not, you will probably end up losing more money than you originally invested. While there are plenty of articles out there online that will tell the best strategies to use when trading on the platforms like the FXTM forex platform, there are not so many that do a good job of alerting new traders of the habits that tend to add up to an unsuccessful trading strategy. The aim of this article is to right this wrong and give you a heads up before you end up falling into some of the same traps that almost every inexperienced trader does to begin with. Read on for the A-to-Z in things not to do when trading forex in South Africa and beyond.
Table of Contents
1. Do NOT Gamble
When things are not going your way, and you have lost money on a series of bad trades, it can be tempting to gamble. Instead of stopping to evaluate their strategy and do more research, many people fall victim to the Gambler’s Fallacy in their desperation to make back what they have lost. Unfortunately, just because you have lost on a number of consecutive trades does not mean that you should be in for a run of good luck. Next time you feel the urge to do something hasty, stop for a second and ask yourself whether the odds of your trade coming good are really stacked in your favor.
2. Do NOT Overanalyze
Research really is the only tool you have to ensure that your trades stand the highest possible chance of being profitable. However, one of the main risks that novice traders make when they start out is overthinking their trades. You do not need to look at one hundred different indicators and spend an age coming to your decision. The key to making money is moving quickly. If you are too ponderous, you will miss the boat on a trade no matter how much time you have spent on your research.
3. Do NOT Make Emotional Decisions
Every experienced trader has their own tried and tested trading strategy. If you ask them the key to profitable trading, they are likely to tell you that their success comes from building a good trading strategy and then sticking to its principles at all times. The worst thing you can do is to let your heart rule you your head. There is no room for sentiment in the world of forex trading – when it comes to currency, all that counts are the cold, hard facts.
4. Do NOT Make Ad Hoc Changes to Your Trading Strategy
When you first start trading forex, it can be to work out what kind of trader you are going to be. There are many different strategies, some of which are geared more toward the short term and others that have a longer outlook. If you start picking and choosing which principles you will apply to each individual trade on an ad hoc basis, you will more often than not end up losing more money than you make.
5. Do NOT Enter Too Many Trades at Once
The final mistake that novice traders can make is entering into too many trades at the same time. Every single trade that you make requires you full care and attention. Overstretching yourself will prevent you from dedicating the time and effort that it takes to first thoroughly research a trade and then to monitor it carefully enough to know when the most opportune time is to close. Not only is this true, but by making a high number of smaller trades which have not been researched properly, you will limit your profit potential in the event that you do win big on one of them.
Entering the exciting and sometimes turbulent world of forex trading can be a rewarding experience. Winning is a great feeling, but things can quickly stop being fun if you start to lose money. As with any type of gambling, the value of proper research and a watertight strategy cannot be understated. Avoiding the pitfalls mentioned above should put you on the fast-track to forex success.