Most people will have heard about the forex market considering it is one of the largest, as well as one of the most accessible, financial markets on the planet. However, despite there being many forex investors, there are only a few who are considered to be truly successful. The climates of the market, combined with the leverage of borrowed capital, means traders have no room to make mistakes. With the factor specific circumstances and risks relating to trading currencies, many traders face more risks within the world of forex than elsewhere.
There are several common mistakes that stop investors from realising their investment goals. Read on to find out some of the more frequently occurring mistakes that can deteriorate profits.
A frequently committed sin within trading is letting emotions influence your decisions. If you do not maintain your trading discipline, you will turn those small losses into significant financial hits. Many successful traders suffer small losses before achieving a few big wins. If you give in to emotions and lose control, divert from your plan and focus on the short term, you stand to lose a lot more than you may be able to afford.
You may have also heard the saying “failing to plan is planning to fail”. When it comes to the forex markets this is especially true. If you create a strong risk management plan and have strategically placed goals to achieve, you can navigate the choppy waters and avoid the common pitfalls.
Furthermore, many traders fall when they fail to adapt to the ever-changing market. Forex is constantly changing, so without strategically having backup routes to take for every possible scenario, you can expect to be hit with losses. The market changing brings both opportunities and risks, by being able to adapt to what could happen, you won’t be in for any nasty surprises if it does happen.
Many things in life are best learnt through trial and error. It is perhaps one of the fastest ways to learn a new skill, but when it comes to forex trading it is a categorically monumental mistake. Efficiency is key to get right, and learning from your own mistakes is much slower than learning from the experience of other, more professional traders. There are many formal trading certifications and even mentor relationships available which will get you up to speed much quicker than if you went it alone.
Success is derived from experience and strategies, so do not expect abnormal returns and do not front capital with that aim in mind. This ties into your trading strategy and starting to trade through emotions. You need to have realistic expectations to be successful.
While the strategy is crucial, another key strategy that is often overlooked is risk management. You should always look to diversify your portfolio as well as implement stop losses. By knowing exactly the amount of capital that is at risk, you can assess whether you are satisfied with the risks compared to the benefits.
Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment.
Alexander Bowring is a London based writer and a Southampton Solent University Screenwriting graduate. He has worked alongside TV personality and Telegraph feature writer Alison Cork, whilst also having produced content for ITV, This Morning, Canvas8, Who’s Jack, Alison at Home, and Bonallack & Bishop Solicitors. Alexander also has a keen interest in investments.