There are three major mistakes too many newbies make as they dip their toes in the wild waters of foreign currency trading. Make these blunders and you'll blow your chances of forex success.
1. DON'T miss the step of trading on a demo account before using real money. Reputable forex brokers have the technology that allows you to open a demo account and operate it exactly as you would a real trading account. You'll find out how to place your orders, how to follow what's going on with your trades, when to get in and out of positions, etc.
Every forex trader wins some and loses some. But in your demo account you won't mind losing "demo" cash as it won't hurt your bank account.
It can be difficult for newbies to believe it's OK to lose some of their trades, but it is. Don't believe anybody that tells you they never lose, because they are lying. The key is just to accept that, and your long term goal is to win more than you lose.
So DO practice with a demo account before trading for real.
2. DON'T rely exclusively on a robot to do your forex thinking for you. Forex trading robots can let you trade even when you can't be at your computer, and that makes them a great tool.
But there are good robots and not-so-good robots. Some will work well for you and others won't. A robot is just software, and sometimes it will come up with bad answers. If you can't recognize that, your trading will suffer. You need to know when the robot you are using is coming up with the right trading signals, and you'll only do that when you have educated yourself about forex.
So DON'T let the robots do all your thinking before you know the basics of trading. DO use a robot as part of your trading business after you have gained some education and experience. Here's some information about a robot that really does work.
3. DON'T trade on emotion. Lots of unexpected things can affect currency prices, and sometimes quite dramatically. You'll often see big spikes or drops right after a major world event, for example, such as an earthquake or other natural disaster, major political upheaval or even the sudden illness of a world leader.
It's easy to panic when these things happen and sell prematurely. At the same time, it's easy to be euphoric over great economic news and start buying inappropriately. Emotion-based forex trading is the way of disaster. Don't do it.
Making good use of technical analysis and trading charts is one way to guard against this. The charts don't lie.
So DON'T trade on emotions or hunches. DO set your trading strategy and stick with it, regardless of world events or runs of "luck".
These principles may seem self-evident, but you'd be surprised at how many novice (and even not-so-new) traders fall into these trips, to their cost. Don't you be one of them.
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