If you are prepared to adopt the right attitude, then trading Forex can be a very profitable activity. This is because you can achieve above average returns if you are able to control its above average risks. For instance, you can achieve success if you learn how to trade like Forex experts because they acquire significantly greater profits than beginners. So, a good place to start is to gain a deeper insight into why this is so.
You can commence this task by obtaining an understanding of the psychology of novices when they are first confronted by the intimating Forex environment. Most of them are badly prepared because they were probably attracted to Forex by the intense marketing campaigns surrounding it. Their initial objectives are completely unrealistic in that they would think that currency market is a ‘get rich quick’ scheme. Even if they have a trading strategy, it will be weak. They do not understand that they will not win every position.
As beginners also have restricted money and risk management awareness, they consistently overtrade by risking much more than they can justify losing. They do not realize the importance of restricting their risk per trade to a maximum of 2% of their total equity. In reality, just a minute proportion of investors are successful.
Top 7 Mistakes of New Traders
Most novices give up quickly because of some or all of the following reasons:
- They do not know how to use demo trading properly.
- They do not understand how to design a well-tested Forex trading strategy.
- They have minimum money management skills and overtrade risking constant margin calls.
- They have not developed a robust trading psychology that prevents their emotions from influencing their trading decisions.
- They have a gambler’s mentality instead of treating Forex very seriously.
- They commence trading with real funds before developing and fully testing a strategy using demo facilities.
- They attempt to trade multiple currency pairs at the same time before they have achieved a profitable track record with just one.