FX trading is a lucrative career in Australia. By learning how to read the trends and strategizing, any Aussie trader can make good profits on the FX market. That said, it’s not uncommon to find novice traders who lost all their capital experimenting. Making losses does not have to be some kind of rite of passage in this business.
It’s the common mistakes that new traders make that lead to big losses and endless frustration. We cover some of these common blunders in this guide and show you how to avoid them. Here are five of the most common newbie FX trading mistakes and how to avoid them.
1. Not Testing Strategies- No Plans
Forex trading involves a lot of research and strategizing to succeed. It’s not as simple as it might appear on the outside. Novice FX traders always plunge into the live market with their little capital and get burned almost immediately. They often don’t have a clear trading strategy or goals. Instead, they choose to react to the volatile marketplace in the hope of making money.
How to Avoid this Mistake?
Before you start trading, it’s best to devise a solid plan and set your goals. Assuming you have already learned the fundamentals of FX trading, spend some time with the demo account. After this, you can go ahead and open a live forex trading account and start trading with pre-defined strategies.
2. Not Setting Your Stop Losses
The last thing you want as a new trader is to have your entire trading capital wiped out when you are away. A stop-loss will help you cut your losses should the market reverse with your trades in there. Most novices often fall victim to greed or over-confidence and end up losing money in the FX market.
How to Avoid This Mistake?
Most trading platforms allow you to define a stop loss when you make a trade. You may not get the whole amount invested but at least you will have something remaining to trade with. This is because stop losses often trigger a sell on the next available price which is often lower than the amount invested.
3. Not Managing Your Capital
The basics of money management and investment also apply in the FX market. However, most FX novices fall into the temptation of over-investing in attractive trades. The rule of thumb in FX trading is to never put all your eggs in a single basket. Only invest ten percent or less of your capital on a single trade and diversify.
4. Trading Based on Emotion and Intuition
“I have a good feeling about this trade”, this is a common phrase among novice traders and losers in the FX trading market. There is no place for intuition and emotion in the FX market, just data, charts, and trends. You can make some wins with intuition but the loses will outnumber the wins in the long run.
How to Avoid This Mistake?
Take time to learn how to read the trading data at your disposal. From MA graphs to oscillators, ATR’s to candlesticks, you need to have a scientific approach to trading. You can only learn how to create your trading strategy by using the data at your disposal. Blind intuition almost always leads to losses.
5. Trading on Volatile Days
It’s common to find new FX traders thinking they can make a kill based on a news item or political events that could affect the currency. This is often a grave mistake as a volatile market can swing violently in either direction at this time. Only experienced traders can take advantage of such events based on long term strategies,
How to Avoid This Mistake?
The best wat to avoid this is to avoid making trades when there are major announcements or political events that affect currencies in your watchlist. Leave this kind of market to the experienced or most risk-averse traders until you reach a higher level of expertise.
Final Remarks
Forex trading in Australia is profitable and ripe. However, new traders must approach the marketplace with the right attitude and skills. With the right mindset, anyone with the skills can win in FX trading.
Leave a Reply