The currencies market is widely unknown to many, and may seem as foreign as the currencies that are being traded by the thousands every day. There are several pitfalls a trader can meet if they don't understand some basic truths about the market.
Here are four delusions Forex traders might face that can lead to setbacks on their journey to success:
"Forex is more risky than trading stocks or options."
You have just as much control over the risk you experience in the Forex markets as in any other type of market. Our head instructor, Shawn Lucas, teaches our traders about the idea of risk. To sum it up quickly for you, you aren't risking anything until you commit capital. By creating a trading plan, and sticking to it, you'll reduce your risk. Risking 2% of your account trading stocks or options is the same as risking 2% of your account in the currencies market.
"If I just keep trading, I can make a little more money"
You have a trading plan, you stick to it; when you hit your trading goal for the day, you turn off your platform. On a good day, we might feel tempted to keep trading just a couple more minutes...which turns into hours...which eventually results in losing trades. On a bad day, we might keep thinking the next trade is going to turn the day around, and we get caught on a slippery, and undoubtably painful, slope. It's not always the quantity of your trades that matter, but the quality.
"I can make some quick, easy cash trading Forex"
If you're looking to learn how to trade Forex just to make some quick, easy cash then you probably need to look somewhere else. The economy is not a magic box where you can put a little bit of money in and get a lot out. While it's true that a good Forex trader is able to increase their accounts substantially trading a couple hours a day, there is a lot of evaluating, planning, control, and work that goes into properly analyzing the markets. Trading requires discipline and strategy–not luck.
"It's going to come back soon..."
I've talked to a lot of traders who hold on to their trades for days or months because they just know the market is going to turn around. Don't get stuck in a losing trade because you're waiting for it to come back. Losses happen when you're trading, the trick is to control them - not completely avoid them - so when a trade goes against you, let it hit your stop loss and keep to your trading plan.
- How to Manage Losing Trades
- What Makes a Trader Successful
- Top Trading Habits to Break When Trading Forex
Forex trading is a great tool for regular people to learn money management and provide an additional income that could be applied to a retirement fund, debts or student loans, or to pursue a passion or hobby. A lot of our traders talk about how they've developed a love for currency trading, and now that they've devoted time and work to developing their skills it's becoming a profitable past time!