Foreign exchange market (Forex) has been alluring an increasing number of trading novices over the past few years. Currently, more than $5 trillion is traded daily and the market is solid enough for Forex brokers to offer leverage on trades for their clients.
Forex owes its popularity to the fact it is perceived as a perfect place to achieve financial freedom which is the main reason behind a vast number of trading novices flowing to the market every day.
Nevertheless, Forex is a sophisticated market and you need, at least, the basic understanding of Forex mechanisms to prevent yourself and your digital wallet from costly mistakes. Let’s then check the 3 most common mistakes made by Forex novices and ways to avoid them.
1# Lack of trading plan
Success is built on a firm plan which also turns out to be true when it comes to Forex trading. If you trade without a solid trading plan, you increase the likelihood of losing money.
Therefore, before you start, make sure you have elaborated a list of rules that will guide your trading journey and money management strategies. If you opt for one of the best Forex brokers available, they will also equip you with useful trading tips.
Nevertheless, there are a few basic points that you always reflect on before start trading, such as:
- how to enter, exit and evaluate a trade,
- what currency pairs you should concentrate on,
- how high is your risk tolerance (and what leverage is appropriate for you),
- how much you can lose and risk on individual trades.
2# Lack of solid research
Many Forex novices are attracted to trading by the potential profit, but, in the process, they forget to make a solid research before staring their trading journey.
Although choosing the best broker basing on the brokers ranking is crucial, there are also other areas that you should familiarize yourself before kicking off.
Therefore, before starting Forex trading you should know:
- how interest rates and economic news impact currency pairs,
- what technical indicators you need to consider to trade successfully,
- what are the best strategies to maximize your benefits and minimize losses.
3# Ignoring economic news
Forex is built upon interconnected dynamics where politics, economics and market fundamentals mix and mingle creating both possibilities and risks for traders.
Therefore, remember that Forex market is a dynamic place where everything can change within a moment. Therefore, you need to keep track of the latest economic news and events or central bank decisions as they all significantly impact on trends in currency pairs.
All in all, Forex trading is an exciting journey, but, in order to trade successfully, you not only need to choose the best Forex broker basing on the Forex brokers rankings, but also remember about elaborating a solid trading plan, research and keeping up with the latest economic news.