7 biggest mistakes in Forex Trading

What is the reason why only a small percentage of Forex and CFD traders make profits in the long run while the majority of investors lose money in the market? Although there is no patent solution to this problem, we would like to introduce you to the biggest mistakes that most traders make in order to improve their chances of trading successfully in the future.

The main reason for this article is to introduce you to some important aspects of Forex trading. However, this time we won’t tell you what you should do, but rather what you shouldn’t. Sometimes it’s better to just name the mistakes so that you can avoid them in the future and make progress in your development as a forex trader.

1. the search for the holy grail

Many traders often spend years to find the holy grail of trading, a certain magic indicator or even a whole armada of indicators that perhaps only a few people know should bring the desired wealth in the shortest possible time.

But fact is: There is neither one nor several magic indicators that will make you a millionaire in a short time. The main reason for this is that the market is constantly changing. Every single moment is unique. Therefore, there can be no trading system that delivers constant profits in every market situation. A system that works in rising markets will probably fail in falling markets and vice versa. The solution is to find or develop a Forex strategy that fits the trader’s personality, otherwise the trader will find it difficult to trade according to this system and follow its rules.

2. the search for fast money

Unfortunately, this is why most traders start trading Forex or CFDs in the first place. Certainly also because it is presented in the public or in the marketing campaigns of the brokers as if it were very easy to make money with Forex trading. The same applies of course also to the trade of CFDs or binary options.

Fact is: Trading itself is simple. No matter whether shares, CFDs or binary options: Finally, you can open and close positions with one click. On the other hand, it is very difficult to generate long-term profits by trading currencies or other financial products. You need a lot of knowledge, patience, discipline and commitment. This list could go on endlessly but to make it short: Surely it is possible to make constant and good profits with Forex trading – but it is definitely not easy.

If you want to know what rules you have to follow to become a successful Forex trader, read our 25 rules for more success in Forex trading.

3. Search for excitement

There are also investors who are attracted to the Forex market or other markets because they think it is exciting to be a trader.

The fact is: Of course it’s exciting to trade in the Forex market or even the stock market. After all, it is the largest “casino” in the world. Similar to successful poker players who calculate their chances of winning against their opponents with the probability of winning with the current hand, successful traders do not look for the kick of trading, but try to follow the rules of their system without too much excitement and thus increase the probability of consistent winnings. If the search for excitement is your main reason for trading Forex, sooner or later you are likely to find that this may have been the most expensive adventure of your life.

4. no money management

Many traders, especially beginners, often forget this important aspect of trading, but some traders also think that you should only start money management when you start generating consistent profits. They completely forget how dangerous it is for traders of all experience levels to trade without risk management.

The fact is: Good money management ensures that you always maximize your profits and limit your losses. Good money management ensures that you can trade tomorrow, the day after tomorrow, next week, next month and for years to come. In short: Without good money management you will not be successful in the long run. So use it!

5. Psychologically not prepared

This is one of the most underestimated points when it comes to Forex trading. One of the most important principles of financial markets is that the price of any instrument is based on the perception of each individual market participant (i.e. the masses). In other words, the price of any instrument, be it currency, stock or commodity, is based on the fear, greed, ego and hope of all market participants.

The fact is: Knowing which psychological issues affect the decisions of the market participants definitely shifts the chances for profits in their favor.

6. Lack of education

Education is the basis of knowledge and discipline. Just as lawyers and doctors need several years at university to get their degree, Forex traders need many years of study and experience. You may wish to turn to other more experienced traders to learn some things. This is no substitute for your own experience, but it can definitely help you avoid some mistakes from the beginning.

The fact is: Especially when we lose, the market teaches us invaluable lessons. With every trade we make we learn and try to avoid making mistakes in the future and improve profitable approaches. This learning process never stops and we continue to learn. We should never get cocky and think we know everything. Because these are usually the moments when the market proves us wrong.

7. Wrong Broker

This point can be crucial for their success and further development as traders, as the choice of forex brokers can play a decisive role in their success or failure.

Fact is: Depending on your trading strategy, it is quite possible that your way of trading may generate profits with one broker while you suffer losses with another. Thus, too high spreads or delayed order execution can logically result in your essentially profitable strategy still generating losses due to these obstacles. We therefore recommend that you carry out a detailed Forex broker comparison before opening an account, so that you can find a broker that is best suited to your needs.

In our opinion, these are the biggest mistakes made by beginners as well as advanced traders, which prevent you from successfully trading Forex, stocks or CFDs.

Making money in the long run by trading financial instruments is not an easy task. It requires hard work, experience and perseverance. But if you avoid the above mistakes and stay on the ball, you will come closer to your goal of becoming a successful trader with every trade.


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