Forex trading is quite complex and it is definitely a high-risk venture. It could easily become a source for earning handsome profits or also could plunge you into a deep abyss of financial losses. The only deciding factor between a profitable and a loss-making currency trade is knowledge (or the lack of it).
“Failures are the stepping stones to success.” This popular adage actually hints on learning from your failures. But since failures are costly, I personally prefer learning from the failures and mistakes of others. Here are a few pearls of forex trading wisdom that are based on the commonest reasons for failure of forex traders.
1) Always Practice on Demo Accounts
I think this tip in itself is worth its weight in gold, but newbie forex traders often ignore it and then end up in losses. You should not even think of entering a live forex trade unless you have practiced on a demo account to a point that you reap consistent profits on it. There is no shame in going back again and again to your demo account to refresh your knowledge and sharpen your forex strategies.
2) Invest in Training Yourself
I would say that investing in training that teaches you effective forex strategies to trade currencies profitably is mandatory. When you invest in gaining knowledge you are actually not spending money but insuring yourself against a lot of future losses.
But do not throw away your money buying everything that is in the market. Invest in training that focuses on making you an expert in trading forex. Other traders are investing in buying automated trading systems and the like, which is a huge mistake that you now know is better to avoid.
3) Choose a Platform That Suits Your Needs
The commonest mistake that I have seen traders make is in selecting a platform. They simply jump onto the most popular one without applying much thought on this.
I suggest that you choose a forex trading platform that is well suited to your needs. What use is the most popular platform to you if you are not very comfortable with its layout and workings?
Spend some time in trading demo accounts on the same platform that you propose to trade live.
4) Maintain a Trade Journal
If you are even a wee bit serious about your currency trading then you will surely invest time and efforts in maintaining a journal of all your trades. This is something that a majority of traders are lazy to do and not surprisingly end up as failures.
A trade journal will help you immensely in analyzing your past trades and gaining insights from them for the future ones. But you must discipline yourself to diligently maintain each and every one of your trades and include the details like the strategies used, prevailing market environment and of course the signals and indicators as well.
5) Don’t Let Your Heart Dominate Your Brain
It is imperative that you fully understand the role that your emotions could play in disrupting your trade of currencies. Emotional trading has left too many traders devastated and you definitely do not want to join the list of unsuccessful forex traders. Letting your heart overtake your brain is something you must avoid at all costs.
Say no to emotional trading and yes to learning trade strategies. If you can manage to gain mastery over a particular strategy and discipline yourself to base your trading decisions on this strategy, then you will certainly see more of success.