Blog



Common Pitfalls Of Forex Trading


Posted: 3rd February 2016 09:13

FX trading, or Forex trading, refers to the act of trading foreign currency. It works in a similar way to stock trading and because currencies are constantly increasing and decreasing in value against other currencies, there is the potential for you to gain a profit. It’s gaining popularity around the world and many people favour this type of trading over others because of its many benefits, which you can read about if you visit CMC Markets.In fact, the Forex trading market is the largest in the world, with roughly $5.3 trillion traded daily. If you want to start Forex trading as a home business, it’s worth bearing in mind that it’s not a guaranteed way to make money and, just like other forms of trading, there are common pitfalls I suggest you’re aware of.

Lack of knowledge

When it comes to financial trading, you’re going to stand a much better chance of making a profit if you know what you’re doing. Even before you get started, it’s important that you understand the market and how it works, because it isn’t always going to be predictable. Don’t rush into trading straight away – take some time to get to know the ins and outs of the market, so when you do come to trade, you feel more confident because you know what you’re doing.

Greed

Many people do see Forex trading as a sort of get-rich-quick scheme and when they get started, they think they’re going to profit straight away. The reality of it is that there’s no guarantee of you making a profit. Being too greedy can make your Forex trading experience unprofitable because greedy people tend to make rushed decisions without thinking things through and very often end up making the wrong decision. You should manage your expectations and have realistic aims about what you can achieve. 

Impatience

In order to make the best move, or any move that won’t result in you losing your money, you may find yourself having to wait hours and hours for the right moment to do so. If you’re impatient, you’re going to find Forex trading a lot harder because there will be times when it’s not in your favour to trade, so you have to patiently wait until your opportunity comes around. This could be one of the reasons why 65% of US tradersexperience losses every quarter.

No strategy

Being able to make a profit from Forex trading requires a lot of knowledge not only of the market itself, but of how to react to it. Creating a strategy gets you thinking about important things, such as how to manage your money, when to risk it, how much to risk, when to trade, whether to enter a trade or not, etc. If you don’t have a strategy, you’re not going to be as well informed when it comes to making important decisions, and one bad decision could lead to you losing money.

Trading too regularly

Even though you don’t have to pay commissions, many don’t realise that the amount of their spreads can quickly add up. The spread is the difference between the bid price and the asking price. It can be tempting to do lots of trades, but you have to take spread costs into account, otherwise you’ll end up having to pay much more than you thought you would.

Even though Forex trading does have its advantages, there are many pitfalls that you need to avoid if you want to stand a better chance of making a decent profit.


Comments


close

Subscribe to our newsletter

Sign up here and get the latest news and updates delivered directly to your inbox

You can unsubscribe at any time