In simple words, “Forex Trading” is a term that means trading by exchanging foreign currency. The use of foreign currency is a common practice in the global trading market for buying and selling commodities. Now, investing in foreign currency and selling it in the trading market has become popular as well for offering good scopes of making a profit. Millions of investors take part in forex trading because of its easy-to-access facilities and comparatively less volatile appearance. But do all traders get the same output of their investment? No. In reality, there is always a risk factor and the traders can experience a financial loss by making a few forex trading mistakes unknowingly. If you have a plan to become a successful forex trader then you must be aware of the 10 common forex trading mistakes that traders do unknowingly.
In the forex trading market, you need to buy one foreign currency by selling off another currency. With time the value of the foreign currency changes in the trading market. You may get a higher value of the foreign currency that you have bought and that becomes your profit. It sounds easy, right? But the reality is not always so easy when it comes to predicting and investing in the right foreign currency. A minor mistake in the trading market can bring you the worst loss. But you need not panic.
If you know the forex trading mistakes beforehand then you can avoid those consciously by maintaining the forex trading guidelines.
You can go closer to success and make a profit in the forex trading market if you open an account with DFSA regulated forex brokers in UAE and learn the strategies of recognizing the right foreign currency and predicting its future scopes.
Here is the list of 10 mistakes traders should avoid:
1. No proper planning for forex trading
Investing without planning is a major forex trading mistake that you should never make. You need to have a proper plan of what amount you want to invest and for how many days. You can invest in forex trading for a long or short period depending on your prediction of the future of the foreign currency. Buying a foreign currency and selling it off without planning can invite a poor future. So, you should be conscious of the future of your today’s investment in the forex trading market and accordingly, you should make a plan.
2. Taking excessive leverage
Leverage means the amount of money that the investors borrow from the brokers for investing in the forex trading market. The attraction of investing in the forex trading market becomes higher with the leverage because the requirement of investing your personal capital becomes less in this process. But you should understand how to manage the leverage when you are going to invest in a foreign currency. The brokers are also there to guide you in taking leverage and understanding the leverage benefits but you should be conscious and understand the hidden terms and conditions to avoid the forex trading mistake.
3. Investing money from basic needs
You should never invest money that you keep aside for your basic requirements. The traders should always keep in mind what if they lose their money in trading. So, if they use the money that they need to spend on their daily need then they may face financial problems in the later days. So, it is safe to use the money from the savings for luxurious purposes and try to make it more by winning the forex trading stock.
4. Less research
Less research in the market means lowering the scope of winning money. If you decide to invest in foreign currency then you need to understand the available pairs of foreign currencies and their working strategies. Without researching and understanding the scopes of the trading market, you should never take further decisions.
You can take the guidance from experts to understand the future of foreign currency and its value in the market. You should also research well and study the strategies of forex trading in detail. The market condition along with the socio-economic condition of the country should be clear to you before buying the currency of the country. The informed investment is important to ensure your confident and steady performance forex trading market.
5. Expecting good results from the bad foreign currency
When you are planning to invest in a lost trade expecting a good return after holding it for a long time you are making the worst forex trading mistake. The investment in the wrong foreign currency and expecting a good return after a long period can also keep you away from using the money in the proper stock. As a result, you must not get the proper return on the investment.
6. Emotional decisions in trading
Traders should never be emotional and anxious when they set a goal of making money from forex trading. In the trading market, you may get a different opening for additional trading positions after losing a stock. This is a common strategy for compensating the loss and if you are an emotional trader then it may attract you. But you should be able to keep the emotion aside when dealing with foreign currency.
The trading fears can also influence your trading decisions and insist you take the wrong steps. You may fear losing your position in a valuable foreign currency by trading and investing in it without proper planning and research. On the other hand, the traders may miss the opportunity of selling the foreign currency at the right time because of their fear of loss.
7. Investing in different trades
When the traders have less understanding of the trading market, they may find it fruitful to invest in different correlated trades thinking of earning money from any of those. But this is another forex trading mistake that they make. Taking part in a few forex trading platforms can make them proficient in this field and educate novice traders about the reasons for which they should not start investing in irrational trading.
The traders should understand the fact that in forex trading investing in the same trading setup in different forex pairs is a forex trading mistake. This is because when the trading setup is the same then those are correlated and if one pair goes down all the trades will go in loss similarly. So, the amount of the loss increases.
Trading without proper fundamental and technical analysis for a novice investor may become harmful for this reason. Following the trend in the market and entering into the world of euphoria can increase the risk of loss in forex trading.
8. Choosing the wrong trading broker
This is another forex trading mistake that beginners do and face a huge loss. The broker for forex trading should be reliable and has a good background. Otherwise, all investments may go in vein. The beginners can opt for a test trading of a small amount through the trade broker and check the result. If the experience goes well then the trader should rely on the trade broker. This can reduce the risk and help the traders to experience good forex trading.
9. Skipping the demo account experience
The opportunity to experience the service of the broker to a demo account should never be skipped by novice traders. In the case of forex trading, you can check whether the risk is less or not and whether you get an accurate and reliable facility or not before going forward with the service. Moreover, the environment should be educational while trading with the help of the broker so that you can also learn the technique.
10. Ignoring economic and mathematical data
No matter whether you like maths or not, you should be able to understand the mathematical concept before getting into the trading calculation. If the trader skips this step then learning to trade and understanding the calculation or trading prediction can never be possible. So, if you are not good at the basics of maths and economics then understanding trading can be difficult. In that case, you can rely on a trading professional or take a forex trading course to understand how to progress.
Final thoughts
Investing in online forex trading just to make money can never keep you stick to this volatile market in long run. Understanding the concept of forex trading is essential for performing confidently. One mistake can take you a few steps behind in the competition but you need to learn lessons from the experience. Keeping a note of your trading steps and analyzing it can give you some good results in the coming days. You should always keep a positive mind and the ability to accept your forex trading mistake to grow.