Common Mistakes of Forex Trading

June 4, 2012 by
Filed under: Economic News 

New forex traders tend to feel invincible when they first begin trading.  But with the first few losses, traders quickly learn that they’re not invincible (nor is their bank account), and that the most common mistakes of forex trading could have been avoided if they had just relied a bit more on due diligence, and relied a little less on pure luck.

Here are the top two common mistakes of forex trading:

  1. Believing that forex trading is simple, and that anyone can do it.  Yes, in theory, it is simple, and yes, in theory, anyone can do it.  But it is in practice that the difficulty arises.  Without learning as much as you can about not just forex trading but about forex technical analysis and fundamental analysis, you stand to lose a lot more money than you’ll ever make.  Forewarned is forearmed, so get yourself the best forex trading education you can, take as much time as you need to learn it and learn it well, and then proceed cautiously.  Anyone can trade forex, but not everyone does it right.
  1. Believing that you can get a good forex trading education overnight.  There is so much to learn and understand about forex trading that a single night won’t give you enough of an edge to truly make a difference.  Forex trading isn’t simply pulling the right pair of forex currencies out of thin air and choosing a buy or a sell price – it’s knowing which pair to choose, which direction they might be moving in, what events will play a part in their trade, etc.  Understanding forex fundamentals isn’t a time consuming process, but one night’s worth of education won’t give you all that you need to succeed.  If you’re interested, say in trading Euro and U.S. Dollars, learn what the pair are doing now, why they’re doing it, what they might be doing tomorrow or the next day based on what analysts and economists and other traders think.  Understand that there is a vast difference between a guess and an educated guess.

Once you’ve learned how to avoid the two most common mistakes of forex trading you can be on your way to a successful career.  If you haven’t been able to avoid them, that’s okay, too.  The good thing about forex trading is that it doesn’t hold a grudge.  So long as you know where you went wrong, then you’ve learned your lesson well.

Written by Sara Patterson – fundamental analyst for DailyForex.com

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