Forex 101: Learning from Your Trading Mistakes

Forex will always be high risk. No matter how skilled you are, or how experienced, you’ll inevitably face the prospect of losing any money that you stake, so it’s important to make certain that, when the worst happens, your loss is not a complete waste of your time and resources.

But how can you achieve such a lofty goal? The answer is simple: you must learn from your mistakes. Things will inevitably go wrong, but to tip the balance of luck in your favour, you need to educate yourself to make sure that your folly is not repeated a second time.

To help you out, here are three of the most common mistakes, and some of the best ways to avoid them…

learning-from-trading-mistakesThe Risk-Reward Balance

One of the most frequent mistakes made by novice or overambitious investors is to accept a level of risk that is simply foolish. Too many people fall for the potential profits involved in high-risk trades, and they forget to complete a proper risk-reward analysis to weigh up their gamble. The best way to avoid this is simple: be sensible. Always assess the potential risk alongside the potential rewards, creating a comprehensive profile of the trade. Unless the latter significantly outweighs the former, then don’t make the move unless you’re prepared to throw away the money that you’ll stake.

Trading Reactively

Even more prevalent than the former problem is the ‘don’t get mad, get even’ approach. Although this may sound impressive on a film poster, it is the very worst methodology to apply to trading. When you play the game of forex, you will inevitably lose money, and this is a reality that you must reconcile yourself with. The important thing to remember is that individual losses barely matter, provided that you stay in the black overall. This means that trying to make your losses back in the spur of the moment is never necessary, and indeed it could really damage your trading strategy. Rather than making hasty, uninformed, and overly emotional decisions, if you find your stress levels rising, then stop trading for the day, and start afresh tomorrow.

Ignorance

The above problems are common in new and inexperienced traders, but the most frequently lamented mistake is a lack of education. Forex is a complex, complicated, and challenging venture, and it requires an in-depth knowledge of the subject, as well as wider factors that may influence it. If your trades are a shot in the dark then you’ll never be successful; however, should you choose to do your homework, the world really is your oyster.

Avoid these common mistakes today, choose a good broker such as OANDA to help you, and turn your trading strategy into a winner.

 

 

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