Every Forex expert was once a beginner. When you begin your trade, it is natural to have a lot of misconceptions. More than 90% of new traders are misinformed about many things related to trading. Most of the people end up blowing at least one or two accounts before they begin to make profits consistently. The mistakes that newbie traders make are common. Let us see some of the most common Forex newbie mistakes in this post.
1. Poor risk management
A lot of new traders never care to learn risk management. They usually trade high lot sizes thinking that higher lot sizes will get them more profit. But they completely forget that they would also lose much with high trading volumes. Risk management is very important in Forex. It is recommended to not to risk more than 2% of your available balance at any point in time. That means, in a $10,000 account, you cannot risk more than $200 at the same time.
2. Low Capital
Forex is a business. The more money you invest, the more money you can earn. These days many brokers allow you to open a real account with a minimum deposit as low as $50. But can you really make money with $50 account? If the account is too small, then you won’t have leeway in lot sizing. Because even the lowest lot size of 0.01 will be too risky. If you have more capital, you can risk more and also earn more. So, accounts with $100 or $200 are as good as demo accounts. If you really want to make a reasonable amount of money in Forex, then it is recommended to start with at least $1,000.
3. Lack of education
Another mistake that many Forex traders make is not spending enough time in learning. Many Forex traders just take a crash course to learn Forex and start trading right away. But if you really want to succeed in Forex trading, then you need to have a strong foundation. Take your time and learn all the basics. There is no hurry to make money. It is recommended to spend at least 3-6 months in learning Forex. Demo trading is also a part of Forex education. So make sure that you practice well in a demo account before going live.
New traders tend to overtrade. Since they are new, they are over excited about trading. So they tend to force trades when no opportunity is available in the market. But quality trade setups take time to materialize. You need to wait for the right moment. There are many experienced traders who only take 2-6 trades per month. So make sure that you do not chase the market.
5. Having unrealistic expectations
Many new traders approach Forex as if it is a get rich quick scheme. They don’t know how much they can expect to earn in a month. When you expect too much, there will be a lot of disappointment upon failure. That will make you depressed and lose confidence. So, don’t expect to make a profit right from the first month. It may take a few months for you to start to make profits consistently.
6. Poor emotional management
It is human to have emotions. But sometimes emotions take full control of ourselves and influence the way we think. It happens a lot in Forex trading. Because in Forex trading, losing is considered as a part of the game. For a new trader, every Forex loss may be discouraging and depressing. Emotions such as greed and fear can make you take wrong decisions. So, good emotional intelligence is required for success in Forex. It is very important to learn to manage your emotions if you want to become a successful trader.
7. Trading like a gambler
There is a huge difference between trading and gambling. Gambling doesn’t require education, analysis or planning. It is purely based on luck. But luck can’t help you much when it comes to trading. One of the biggest trading mistakes is to trade the Forex like a gambler. When you place a trade, make sure that you know why you are placing the trade. It should be based on a solid trading plan and a good trading strategy.