Online trading is growing exponentially, not just here in Australia, but all over the world and rather than jumping in with both feet, you need to do some heavy research and with that in mind, here are some common mistakes to avoid when trading on the Forex exchange.
- Failure to do your homework – This is a common mistake to make; it is easy to get excited and start trading before you should. This is a sure way to end up at a loss, as there is much involved in preparing your trading strategy. The majority of Australian traders use Metatrader 4, a cutting-edge platform that is designed for Forex trading.
- Chasing losses – This is also known as ‘emotional trading’, when you suffer a loss, your immediate reaction is to double up on the next trade in order to recoup your loss. There is no room for emotion in any form of trading; you should use a stop-loss feature to prevent excess losses.
- Early positioning – Some traders try to get a jump by taking out a position before expected news comes out, yet this can lead to disaster if the markets don’t move in the direction you want. There are many variables that can impact prices; a hike in interest rates, economical news and financial reports, are all things that come into play, along with supply and demand.
- Post news trading – It can be a mistake to act immediately on news; better to consider all the variables before taking a position. You should wait for any volatility to happen before opening a position.
- Breaking the 1% of capital rule – There is a golden rule with Forex trading; you should never exceed 1% of your capital in a single trade. Again, one needs a levelheaded approach when trading currencies and this rule should always be respected.
- Unrealistic expectations – Some people seem to think they will be driving a Porsche a few months after starting to trade. The fact of the matter is, no one is going to get rich quick by trading Forex, generating wealth is a long and arduous process, so if you think you’re going to hit the jackpot, perhaps Forex trading is not for you.
- No exit strategy – It is important to have an exit strategy, which you would use during losses to minimise the damage. There’s an awful lot to learn before you are ready to trade in real-time and we advise you to start with a demo account, as this allows you to get used to the trading process without risking your hard-earned cash.
It is important that you join forces with an established Australian Forex trading platform, managed by a top broker, which enables you to use their many learning resources. The Forex market is open 24 hours a day from Monday to Friday, so your weekends are free to enjoy!
