The Pitfalls of the Forex Trader
With so many people trying their analytic skills on the forex market and becoming forex traders, you can’t help but think of one thing — why are there only a few traders who achieve consistent success as traders?
It’s a question that is hard to answer but from the experience of many traders – both new ones and veterans, there are some things that you need to avoid in order to increase your chances to succeed in forex trading. Avoiding these pitfalls will help you become a better trader:
Searching for the magic formula
Every trader – whether it’s stocks, forex or commodities – dream of stumbling across that magic formula that will open up the secrets of trading. There are those who believe that there is a magical mix of indicators or a previously undiscovered indicator, that will allow them to make a lot of money in such a short time.
But the reality is, there is no such thing as a magic formula. There is no combination of indicators that will make you immediately rich. The market is unique and is influenced by so many factors that no one can predict it with an uncanny accuracy. As a forex trader your goal is to find a trading system that fits your style and personality. Everything else is just fiction.
The quick buck
Many people are attracted to the forex market because of the lure of easy money – or rather what ads or testimonials from some trading platforms would like you to believe as the prospect of easy money.
Learning to trade is admittedly easy. Anyone can learn how to do it. But hard work is needed to turn that knowledge into something that will allow you to make profits from your trades. It takes a lot of study, analysis and experience to become successful.
Doing it for the thrill
Some people think that being a forex trader is a thrilling profession. While it is true that you can derive a certain level of excitement from getting into a trade and having your analysis proven in the form of profits, the forex market is not a place to look for thrills because the losing your investment is a reality you cannot avoid or deny.
Failure to manage your investment
Majority of traders who do not succeed usually forget to do one thing that contributed to their failure – learn to manage their investment. Money management is an important aspect of forex trading. Unfortuntely, many traders think that money management should only come into play when they are already gaining profits, totally forgetting that every trade they make exposes them to risk.
With proper money management, you can geometrically increase your profits while also limiting the amount of risk you’re exposed to on every trade. Not using it will only expose you to high amounts of risk, which will only lead to the inevitable loss of your money.
Failure to deepen forex knowledge
The quest for knowledge is an endless journey, and the same principle goes for forex trading. Traders should strive to learn new things, deepen their know-how on subjects they already know about and learn from each trading experience. Unfortunately, there are some traders who think that the rudimentary knowledge they’ve learned will be enough for them not just to enter trades but also to be successful in trading. This is arrogant thinking that will only lead to failure. The opportunity to learn from each trade is an ongoing process – and one that should never stop.