Make no mistake; the forex market remains the single most liquid and popular financial entities in existence. Even though currency trading volumes declined for the first time in 15 years during 2016, an estimated $5.1 trillion is still transacted during each, 24-hour period.
While this is an extremely enticing proposition to newcomers, however, the forex market is also an exceptionally volatile entity that must be approached with caution. As a result, there are numerous mistakes and errors in judgement that undermine the typical, novice trader, with the following among the most common: –
Failing to Develop a Viable Knowledge Base
Regardless of your trading philosophy or the precise strategy that you use to execute orders, you will need to tackle the forex market from a position of knowledge. This must be carefully accumulated and layered over time, while data can be accessed from numerous resources including official educational courses, offline articles and the type of impartial, online video tutorials hosted by Sharp Trader.
Despite the ease with which the relevant knowledge can be accessed, however, many novice traders enter the market without the necessary information or understanding to thrive in a real-time market environment. This creates gaps in knowledge that are subsequently exposed over time, which in turn restrict your ability to make a profit when trading forex.
Underestimating the Role of Determinism in Trading
While knowledge represents power in the forex market, it is a sense of determinism which ensures that you can negate the volatile nature of currency. In short, traders with a deterministic outlook understand that the forex market is governed by a number of underlying laws, which do not change regardless of the prevailing climate. This makes it possible to distinguish between impactful and irrelevant trends, while it also prevents traders from reacting emotively to every single market shift.
This is a crucial lesson for forex traders to heed from the outset, otherwise they will find their strategies undermined by various market forces.
Refusing to Use Demo Trading Accounts
If you are looking to trade in the modern age, it is imperative that you operate online. Virtual trading platforms offer a host of advantages to novice traders in particular, with the most important of these being access to a fully-functional demo account.
This tool, which is typically used by novices for a period of between three and six months, offers traders access to a simulated and real-time market environment in which they can operate without committing their hard-earned capital. As a result, you can hone your skills and test your strategies for real, providing practical experience and preparing you for the realities of forex trading.
So while a lack of patience may encourage you to ignore the merits of opening a demo account, this is a common and dangerous mistake that can lead to significant early losses.