Trading on the world’s Foreign Exchange market is becoming more and more popular around the UK.
The low capital needed to get going and the ease with which you can trade from home via your PC or laptop has seen lots of new traders dip their toe in the water. While it is possible for big profits to be made from FX trading, it is important to know of the pitfalls novice traders should be wary of. By knowing what you should avoid in advance then you will be able to swerve it when it does appear.
But what mistakes should you be wary of?
Choosing a scam broker
One of the biggest decisions you will make as a new trader is which online broker to use. This is similar to how important choosing a broker to make international money transfers with is. Just as you would read an OFX review before using OFX to make overseas payments, you should also fully research any Forex broker you plan to trade with. This will help you void scam sites and only trust your money with an honest, reliable broker.
Trading without enough knowledge
The FX market works on a pretty basic idea which sees you place trades on the price of a currency pair going up or down over time. This can lead to many new traders jumping into the market and trading with real money, without having the right knowledge to actually do it well. Before beginning to trade, make sure to get a deeper understanding of how the market works, what affects currency pair prices and how to read charts. Doing this will help you become one of the traders who succeeds.
Trading too much
Another mistake to really guard against is trading too much. This may sound counter intuitive as more trades means more profit surely?! Sadly, this is not the case – in most cases it can simply means more bad trades which you will lose. Try to fight the urge to be in the market multiple times a day and only open trades which are likely to work out.
Not using or sticking to a plan
Writing out a trading plan is one of the best ways to help make your trading journey more successful. A good plan will set out an effective trading strategy which currency pairs you will trade, how much you will risk on each trade and how you will find trading opportunities on the charts. A big mistake to watch out for it not drawing up a plan – this is like England sending out its football team with no tactics or instructions. The other major mistake to be aware of is having a plan but not sticking to it!
Take it slow when just starting out
When you make the decision to begin trading in the FX market, it is tempting to dive right in and go all out. This very rarely ends well though. Instead, it is much better to take it steady and find out what you need to know first before opening any trades. As well as what to do, it is definitely worth taking into account what not to do as above.