Trading currency in forex market is not a simple task and it is full of risks and challenges. Many forex beginners and experienced traders have lost loads of money due to adopting a currency trading strategy that does not take into account all factors and elements related to money management. Furthermore, not a single person can make profits at all times and whatever the strategy is adopted by the forex beginners it should always be able to manage losses since it is the part of trading. However, one needs to have a system or a mechanism that will give back more in future than the amount invested.
One of the common mistakes that traders often make is that they are unable to keep their emotions on a side. If a person has established a system then that individual needs to stick to with it, and be as logical as possible. Emotions can get in the way of making profits and most intelligent traders often take quick decision based on their gut feelings.
Consider for example a trader has developed a Currency Trading Strategy and based on his new systematic approach he decided to trade in the market. The first three trades were unsuccessful and on the fourth trade he made profits which covered the initial three losses. On the other hand, another trader made profits on first three trades, and then after that he decided to go big which did not pay off and the individual lost all the money on the fourth trade. The point to ponder here is that emotions can get the best of person and can lead high losses.
Mistakes made by Forex for beginners
Most of the common blunders made by forex beginners are related to trade size. When a trader starts trading in the currency market he does not a perfect idea about trading size and normally an individual go for a high trade size and if he incurs a loss then it also create a negative sentiment.
For example if a trader lost 15% on his initial trade then he would automatically go into defense mode and will try to recover his money that he lost due to trading. For the second trade, he will go for higher trade size, and will aim to get back to previous position as he sees himself as a lesser person. Moreover, this will also result in more pressure, and he will have a need to make 20% profit. However, if his currency trading strategy is not triumphant then he would again lose more money instead of earning.
In addition to, this recovery ladder concept is a never ending spiral cycle that keeps on going and it would eventually lead Forex beginners to very high losses and they end up with nothing in their accounts.
An ideal way to determine trade size without investing a single penny is to go for Demo Trading Account. Demo trading platform is an excellent learning tool which does not require any investment and forex beginners can determine their trading size personality without committing any real funds. It has all the characteristics of live trading account except real investment.