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NO24 - The Most Common Trading Mistakes New Traders Make

"One of the benefits of being a new forex trader is that you can already learn from the mistakes made by other traders. This puts you at a unique advantage. But of course, the trick is in making a conscious effort not to repeat those same mistakes. As a new trader, you are bound to make several mistakes. It is only by making these mistakes that you will slowly learn to grasp the true reality of trading. In this article, we point out the five most common trading mistakes that new traders make. By following this article, you will learn how you can avoid these very mistakes. Remember that while mistakes are good, with forex trading the mistakes can be very expensive. So if you do not want to lose all your money within the first few months of trading, start by avoiding the common mistakes that many other beginner traders in forex make."

As a beginner to forex trading, it is quite likely that you will make some basic mistakes. This is perfectly fine. Mistakes are the way how you can learn over the course of the forex trading journey. But the problem comes when traders don’t quite learn from their mistakes. They continue to repeat the mistakes to the point that they end up losing money.

This is one of the biggest reasons why retail forex traders end up losing a lot of money. Not many pay attention to how they trade but rather focus on the prospects of getting rich by trading.

Here are the top five common trading mistakes a trader makes and how you can avoid or learn from these mistakes.

1. Not understanding the markets

New traders often take the plunge without taking the time to understand how the markets work. Many new traders believe that by simply following a trading system or even worse, purchasing an automated trading system, they can start to make profits easily.

But the truth is far from this. It is impossible to make money from the forex markets if you do not have an understanding of what you are doing. There may be times when the markets will reward you but in the long term, you will not be able to progress further.

To avoid this, you must give yourself adequate time in order to understand how the forex markets work. This means you need to learn how fundamental and technical analysis works and how you can apply these to your day to day trading activity.

2. Risk management

Bad traders chase profits while good traders manage risk. Risk management is often given one of the last preferences when it comes to trading. But the truth is that risk management is important from the first day that you start trading.

Risk management is all about managing the risk on the trade that you have. This means having a good understanding of the markets and thinking rationally. In the forex markets, due to the leverage, it is easy for you to lose more money that what you invested.

Therefore, risk management is one of the most essential things that you must learn before you start to trade forex. When you begin to manage risk, you will see that your trading will automatically improve. If you become complacent and do not give risk management its due attention, then chances are that you will blow up your account very quickly.

3. Managing your emotions

Believe it or not, but emotions play a big role when it comes to your success in forex trading. Because you are trading with real money, your emotions play a big role every time you make a profit and every time you lose.

If you do not control your emotions, you will end up letting your emotions rule your trading. There are two main emotions in forex trading; fear and greed. These two emotions will make you to take undue risks or simply trade out of fear which will keep you from properly capitalizing on the market movements.

We must admit however, that learning to manage your emotions while trading is the hardest part. This is something that you will learn over a period of time and it will not come to you overnight. But if you keep going at it, sooner or later you will learn to master your emotions.

4. Overtrading and overleveraging

The forex markets allow you the flexibility to use leverage. Using leverage, you can control large positions in the forex markets. This means that you can profit from small market movements.

While leverage is essential in forex trading, it also means that you will face big loses if a trade turns against your favor. Therefore, leverage is something that must be used wisely and this falls tightly in line with risk management.

Overtrading is also another common feature among forex traders. Overtrading simply means that you trade huge volumes without having a plan. Overtrading happens because of the fear of missing out, also known as FOMO. This is an emotional trait that pushes you to take undue risk.

5. Not having a trading plan

Following a trading plan is important because it will keep you disciplined. A trading plan is a plan that will tell you where to enter the trade and when to exit. It will also show you how you can manage your risk.

A trading plan is a combination of the fundamental and technical analysis of the markets as well risk management and controlling your emotions. Many beginners don’t have a plan and just trade the markets randomly. This leaves them vulnerable to the market movements and they end up losing more money rather than making any money at all.

Read 902 times Last modified on Sunday, 12 May 2019 08:46