Everybody makes mistakes. Actually mistakes are a part of human nature, but some mistakes could actually cost you very dearly. Today’s post is on 4 such costly mistakes that cause forex traders to lose out on all their money.
1) Uncontrolled Trading
Control and discipline are quite important and more so when you are trading forex with your hard earned money. Without proper emotional discipline and effective money management a noob forex trader could easily blow up all the money in his trading account and sink into extreme financial losses.
Discipline is needed not only when the trades that you deal are winning but also while losing. Despite promising themselves a thousand times over that they will stop trading once a certain amount of money is either won or lost, every resolution turns to dust once these undisciplined forex traders enter the live market with their trades. And then what follows is total and absolute chaos and downfall.
If you look at the psychological factors behind such undisciplined trading, greed and insatiability clearly stand out as the basic source. For such people forex trading is no different than gambling their money away at the casinos.
But any sensible forex trader knows how dangerous it would be equate gambling with forex trading. If you consider forex trading as a way to get dirty rich overnight then you have a serious problem with your understanding of how forex trading works.
There can be only one similarity between the forex market and the casinos – they both like to take your money when you are foolishly throwing it all away.
How Do You Avert This Problem?
It’s quite simple actually. Just be rigid with yourself when it comes to implementing your pre-decided resolution. STOP trading as soon as your upper / lower limit is reached, without giving yourself any sort of excuses or giving into temptations. Just turn around and leave immediately and you will have averted your overtrading and high risk trading.
2) Skipping or Underusing the Demo Trading Option
Every forex broker offers a demo account to get yourself acquainted with the nitty gritty of forex trading. They also generously fund your demo account with virtual currency, mostly up to 50,000 USD. No matter where you learn your forex trading skills from, each of those sources will repeatedly warn you / advise you to demo trade for at least 6 months or if that is not possible, then at least demo trade and consistently generate winning trades for 2 consecutive months.
Despite all the advices and warnings, forex traders keep jumping into live trading as soon as they ‘learn’ a few forex trading basics and this is simply a recipe for disaster. Again it is the greed mentality that makes these traders want to bypass the demo trading altogether and dive right into live trading.
How to Avoid This?
There is no way to avoid this trouble except by committing yourself to use the demo trading platform as advised / recommended by the experts. If you cannot win at demo trades, you will never win at live trades, it is as simple as that.
So better keep your live trading urges in check until you have mastered the demo platform and you can go back to demo trade even after you start live trading and find that you are unable to make any winning trades there.
3) Trading With High Risk Money
If you cannot afford to lose the money that you are about to trade then you have already signed up for failure even before you begin. When you are trading with money that is actually meant to pay your bills or is a part of your retirement saving etc., then you are playing with high risk money. You certainly cannot cope with the losses if your trade is unsuccessful.
How to Avoid This Issue?
Don’t even touch any of your savings or the money supposed to pay your bills while funding your live trading account. Wait until you have some extra money.
4) Unnecessary Complication of Strategies
The most successful of traders are those who master forex trading strategies that are simple to implement. But many of the newbie forex traders are guilty of wasting time and effort in trying to find newer strategies.
That is probably what convinces them to use trading robots and similar softwares for help. Only when you have experienced the live market will you realize how valuable time is and how you need to make trading decisions within seconds in order to make profits. And this is possible only when your strategy is simple and straightforward.
How to Avoid This?
Accept the fact that forex trading success lies in mastering simple but winning strategies. Stop complicating matters and confusing yourself.