Forex trading can be extremely rewarding if you are a disciplined trader or if you have a broker who is disciplined as far as trading is concerned. This is why those who succeed in forex trading make it really large while those who fail become part of the vast majority of failed disgruntled traders!
Although there is no best way of trading, but knowing what the pitfalls could be, keeps you a little ahead in your game. So here we basically tell you what you should avoid when you are in forex trading.
Things to avoid:
- Stop looking for the Holy Grail of forex trading. Many traders are more concerned about tracking a set of magic indicators which would tell them all they need to know about the market and its performance. They think comparing some numbers of these indicators would make them rich instantly or within the next hour! The truth is, every moment in a trading market is unique. It has never happened before and might not ever happen afterwards. Indicators only indicate, the market performs. It is not like a formula in mathematics where you get the same answer with a particular formula. If you are sure about your risk appetite, your trading goals and your account size. Things will go fine.
- Do not consider forex trading if you are looking for easy money. Forex trading is definitely easy, it is simply a click away. However, making money is a different ball game altogether. This requires education, understanding, patience and discipline. You do not earn millions in a few hours or over a period of few days. Nobody does that. Even the most successful traders go through scores of losses, but they stick through looking at the long term gains. If you do not understand the behaviour of the market and its drivers, you would be indecisive, almost crippled.
Do not go into trading, simply because it is exciting and a fun way to make money. You never know, how badly excitement can cause you, if the markets have a grudge against you!
- Money management is one of the most important aspects of forex trading. If you do not manage your money or investments well, you would not be making gains even when the markets are peaking. Or the other way, you might even make huge losses in a good market, due to poor money management. You need to understand the risk in every trade, only then will you be able to invest wisely and get exponential returns. By using money management effectively, you have enough to be able to trade tomorrow or in the near future. You have enough buffer to suffer losses.
- Psychological tuning. The biggest secret of trading in market is understanding the psychology of the fellow buyers. What is demand? People’s eagerness to buy something. The result: high prices! Greed, want and fear are the psychological drivers of the forex market or any market whatsoever.