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Posted by: Samuel Ndwiga on 31/12/2015

Mistakes investors should avoid when trading currency - Forex Market Guide

Mistakes investors should avoid when trading currency - Forex Market Guide

Forex exchange is currently the biggest financial market all across the world. Initially, it was a tedious manual task but with steady technological advancements, it has turned to a profitable enterprise. Multinational organizations and recognized financial unions were the chief beneficiaries of Forex trade but lately it has opened up even to retail traders and individual investors. Even after careful evaluation of the market, proper trade plans and understanding the probabilities involved in Forex exchange, traders are bound to make mistakes. Some of the common mistakes are as discussed below.

Investors make a big mistake when trading currency by not evaluating or having a proper trading plan. Most are under the impression that it is a spontaneous endeavor determined by charts or trends. A smart investor would know that that is not trading but gambling. Thorough research on the trade and conviction for taking it is required as well as comprehensible exit levels and entry triggers. A proper trading plan should make sense and entail everything an investor requires to take into consideration when making his/her trading decisions. Trading plans eliminate second guesses and messy situations whilst trading.

Wherever money is involved, a money management strategy should be too. Without appropriate money management strategies in place, an investor ends up frustrated and losing potential profit. What charges can you incur whilst trading? How expensive is it to withdraw money from your account? How much of your money will you reinvest or how much will you invest? All these are questions that an investor should answer by making a clear money management strategy. Most investors fail in Forex trade because they mismanage their funds with the impression they are or will make more funds, a frequent mistake.

When talking about Forex exchange, the first thing that comes into one’s mind is money. Rightfully so, it is a business that makes money off money. This hugely affects a novice’ reasons for joining the trade, to a young investor; this business is all about the money hence their goals are limited to the money. However, focusing on the money is the beginning of an investor’s descent from their position in Forex trading. Investors will break their trading plan rules while chasing the money and this makes ones empire come down crumbling. This is because as explained earlier, a trading plan is the foundation of any form of trade, Forex especially.

Overtrading is another common mistake investors make in Forex trade. Most investors do this by not having enough capital, having an addiction to trading or frequently opening orders. It is wise to decide the amount of money you would want to pump into the investment as well as how many trades can run concurrently. Forex trade is an exhilarating venture, as the money moves in real-time, some investors get caught up and chase it to the extent of thinking they know what controls the market. This common mistake often causes a major slip up because the focus shifts from the trading plan to chasing money.

Emotion plays a major role in everybody’s life. Different people have different ways of showing different sets of emotion; an exciting business involving money may be a big source of mixed emotions for an investor. Therefore, as an investor it is wise to avoid the common mistake of imbalance, made by most new traders. Taking a loss may make you reluctant to taking every single loss and you may end up making a mistake due to fear. Alternatively, a set of wins may render the impression that one is on a winning streak, this may lead to a major loss or create a losing position out of over-confidence. Therefore, it is important to remain balanced as an investor.

Conclusion

There are investors who have made more money than they thought they would have made out of trading currency. There are others too who have lost all the money they had invested and maybe some more but there are none at the middle. In Forex trade, it is important to treat it as a business that requires adherence to the smallest of detail and clear deductive decisions.

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