The world of foreign exchange (or forex or currency trading) has always been associated with windfall profits and easy money. However, this is not the truth as almost as much as 80 to 90 percent of forex traders fail to earn profits and end up losing all money. Let us access some of the most common and biggest mistakes committed by currency traders so that they can be avoided and profits can be earned on a consistent basis.
Before we read any further, it is important for us to note that forex trading is a financial market and there are no free “gifts or income” for everyone. Moreover, there is nothing called the Holy Grail or the Magic Formula and every trader can lose money, even the most experienced ones, because the foreign exchange market is extremely volatile. It does not really matter how many books on forex have you purchased and read, it also does not matter how much time you have spent to get insights on forex charts, it all depends on your experience, knowledge, patience, and how the market behaves at a specific point of time.
If you want to be a successful trader, you really need to understand that you will win one day and may lose the other day using the same trading strategy. However, a well-formulated and clearly-defined trading methodology can significantly increase your chances of making profits and reduce your chances to lose money. Unless you have a solid trading strategy and stay disciplined with it, you will be losing your money. Moreover, forex trading should never be influenced by emotions such as fear, over-confidence, and revenge as that can considerably affect your chances of making profits and even surviving in the foreign exchange market.
Moreover, forex traders should have realistic expectations from their traders and any hopes of making billions overnight can only put the trader under huge stress and lead to nothing worthwhile. Forex traders should only expect above-average returns from their trades and must take only calculated risks. The best way is to trade only in those trades that offer a 3:1 ratio of profits and losses. This means that the best trades are those that are supported by financial planning and focus more to be on the safe side rather than gambling on bad trades. In addition to that, traders should always emphasize on protective stops and define an exit point even before an entry point is established so that high standards of financial stability are created and managed at all times.