The Foreign Exchange market has become a very lucrative and popular trading place for many traders because of its high liquidity, the opportunity to take leverage, and increased chances of making quick money. But the marketplace is too sophisticated, and making mistakes is more accessible here than making the right decision.
Many journals and reports show that the success rate in Forex is less than that of failure. What do you think? Who and what is responsible for this failure? The only answer is, ‘the trader and his mistakes.’
Here we have discussed the common mistakes that most traders make in Forex and lead them to drown in the sea of failure.
Not developing a trading plan
Many newcomers develop no plan and enter the FX market out of curiosity. But to be successful here in the Foreign Exchange market requires many studies, a lot of practices, and a well-organized plan. Not only the newcomers but also the older ones make this mistake too. After making a profit accidentally, some traders think that they are well experienced and need not have any plans.
Before starting to trade, you should research the market situation, analyze the current and previous trends, target the currency pairs, define your expected profit, and fix the limit of loss you can bear easily. If possible, learn the basics of money management by going through the premium articles at Saxo Bank. Use their educational resources to enhance your trading plan.
And then, ask yourself, which is your comfort zone? Which is your preferred trading style? Scalping? Day trading? Swing trading? Or Position trading? Again, ask yourself, how much are you going to invest? How much risk can you take? And how much leverage you want to take? Got your answers? Now make a clean plan.
International politics, major natural disasters, outbreaks of deadly diseases like corona can change the Foreign Exchange’s market situation. I know some traders who are not eager to keep themselves up to date with the international politics, and economics. But if you go through the history of FX, you may find that there are many drastic changes happen by the various phenomenon.
So, in your daily routine, save time reading the international newspaper, online news portals, and watching TV news. Keep yourself updated. Who does know everything will not be changed within the morning?
Getting stuck with a losing order
Do you know who our biggest enemy is on the way to our success? EGO. Our ego always drives us in the wrong directions. One of the big mistakes that most skilled traders make is to listen to their ego. After losing a trade, maximum traders think that he should trade again. But this is the call of his ego; he should not listen to him. Losing is a signal of taking a break. Whenever you make a loss, be relaxed, think of the mistakes you made, and update your plans according to them.
Reluctance to use stop-loss
Whenever you make a plan, you should keep the “Risk Management” in your consideration. Stop-loss is the best tool to manage your risk. Always start trading after setting a tolerable stop-loss. But some of the failure histories in Forex stated that the leading cause of their loss was the trader’s overconfidence and reluctance to use SL.
Going All In
As we have said before, ‘overconfidence’ is one of the role players that bring failure. Many skilled traders still cannot avoid overconfidence even after knowing that it will be harmful to them. However, one of my trader friends once invested all of his liquid money to buy USD at a very low rate thinking that the currency’s price will surely go high shortly. The trend history and market behavior were saying so. But unfortunately, the price went more down drastically, and he dropped out of the market. If his overconfidence could not drive him, he might invest some of his liquidity and save others from tackling unexpected situations.
In the end, one suggestion, never rush. Set foot according to the pre-plan, keep yourself up to date with the outside world, and work with a cool head. Never lose your temper. We wish you good luck.