By: How To Become A Forex Trader.
Top 10 Ways New Forex Traders Lose Money
Forex trading is not a get rich quick means; all intending forex traders and newbie in forex trading should take good note of this. If you think you will make it big over night in forex trading, then you are making a very big mistake. There are many gurus out there today who never made anything tangible out of forex trading until several years of consistent trading. However, you may not have to wait for 5 years or ten years before you can start making something meaningful out of forex trading, provided you have access to the right kind of information. The purpose of this written piece is to get you adequately informed to ensure you do not have to wait for long before making profit and to give you all the facts you must consider when venturing into forex trading.
You can make money fast and lose it fast in forex trading and all forex traders must keep this in mind. If you do not have the right kind of trading strategy, things may go wrong with your trading plans. However, consistent success in forex trading goes beyond just having very good strategy, it bothers more on having good money management. Many newbie in forex trading lose money, not because they do not have good forex trading strategy, but because they do not have the right money management skill or lack the maturity to implement their money management skills. Some of the things newbie do that make them loose money in forex trading will be looked into below. The purpose of this write up is not to scare off intending forex traders, but to open their eyes to some of the errors that can hinder them and to make them guard against such so they can start smiling to the bank more often.
1.No adequate experience
Many newbie want to start making it big from day one. They may even have access to forex signal services or even have access to top notch trading strategy, but lack of experience on how to put it all together can spell doom for their trading and they will end up losing money. Even if they have started making something tangible at the start, their lack of experience may make them lose everything they have made within a very short period of time. There are so many things to be put into consideration when trading forex. Forex trading should be seen as a real business on its own and the best way to prosper in a real business is to learn all you can in that business. This way, you will be able to make profitable trading decisions. There are some basic principles, ideas and terminologies a newbie needs to learn about forex trading. The newbie needs to be familiar with how the market works and how to apply the candle sticks, the trading indicators and the news events to make a profitable outcome.
2.White elephant ideas
Many of the newbie out there today have great dreams of making millions in forex trading in their first day of trading. They have heard stories of how other make it big and they too have this unreasonable and unattainable expectation that they would make it big the first day. As a result, they end up making unwise trading decisions that will lead to the loss of their investments. Some so called forex gurus and forex coaches have a way of painting the forex market in bright light and any unlearned newbie will fall for these tricks easily. The pictures painted by these gurus make people think forex trading is an easy money-making means where you will not do anything much but make something big. Because of these unreasonable expectations, some newbie even quit their jobs before they start making profit in forex. This is very unreasonable to say the least.
3.No trading plan
Many of the newbie flooding forex trading today do not have any thing called trading plan. They just buy forex strategies from so called gurus or get them free online and they are ready to start applying their new “fail-safe” strategies to real trading without delay with the hope of making it big the first night. This is a very unreasonable perspective about the forex market. If you do not have good trading plan, you are sure of losing money big time. You must make up your mind on the exact amount you want to make each day. After reaching your goal for the day, it is only right to stop trading for that day and wait till the next day for another trading session.
Many of those who lose their money in forex trading today do so due to lack of discipline. They just hit social trading platforms without properly schooling themselves on self control during trading. Patience is one virtue that must be considered by a forex trader that wants to make consistent profit. Many of the newbie lack patience and they end up losing their investments over and over again. They never know when to stop and they may end up losing all their profitable positions.
5.Stop loss and take profit
Lots of so called forex gurus might have taught you never to bother about stop loss, since forex brokers tend to work towards your stop loss and manipulate the market to make sure that you lose your money. If you are following this kind of instruction, you are doing your trading a great damage. Stop loss is designed to help protect your investment. Take profit helps to ensure you do not miss out of possible profitable position.
6.Too high leverage
A sensible newbie will never go for leverage too high than he can manage. It is true that high leverage in social trading platforms gives you better opportunity to making huge profit, you should also know that high leverage opens you to the risk of making very big loss. High leverage is as good as when you are winning, but it can ruin your account when you are losing.
7.How many open positions at once?
If you are not well experienced in forex, you should not open more than one or two trading positions. If you open more than this, you will be doing your investment lots of damages. If things turn against you, it may wipe off your account before you very eyes at the twinkle of an eye. With too many open positions, you will have so many things happening around you at the same time. This can be confusing and can make you lose potentially profitable trades.
8.Riding the trend for too long
Social trading platforms can be sweet, especially when the trend is going either bullish or bearish in your preferred direction, but things can turn against you suddenly if you hold that open position for too long. For example, a sudden opposite spike due to newly released high impact news can turn the table against you and make an erstwhile profitable position to become a losing one. This is where you must never forget about your stop loss and take profit. After the trade had moved in your direction for some time, lock it in by adjusting your stop loss. This way, you will never be caught unawares.
9.Never ignore pip spread
Pip spread is the means via which the forex brokers make their own profits. If the pip spread is too high, it is not in your best interest to trade that currency pair. Some experts recommend that you should not trade a pair if the pip spread is higher than 3. This will help ensure a more profitable trade. If you do not choose your pip spread carefully, a winning trade may be suddenly turned to a losing one. Some currency pairs have very low pip spread and some other ones have high pip spread, it is important to watch out for these so as not to make wrong moves.
10.Lack of proper money management
Any trader that wants to make anything tangible out of forex must have good money management skill. It does not matter if you are trading with some of the best forex brokers in the industry, a bad money management skill will ruin your trading opportunities. Lack of good money management skill makes a trader to fall into temptation and greed. You will find yourself entering into some rather ridiculous trades that you should have avoided. Forex trading must never be seen as gambling; it is real business and must be handled as such.