The good thing about forex trading is that you don’t actually have to do it as a full-time career. In fact, this is one of the best ways that you can have a little bit of cash flow on the side. At the same time, this form of trading is not something that you can take lightly. Although it may seem like you can just breeze in and start placing trades, this isn’t the case.
One of the main reasons that traders fail with currency trading is because they make rookie mistakes straight out of the gate. This can mean depleting your funds early on, not knowing how to deal with wins and losses, or just not knowing how to go about trading the right way. As you can see, there are a lot of errors that you can make and these can result in some serious problems. This is why it is vital for you to understand some of the more common issues that traders, particularly part-timers, have and know how to avoid them. Here are the ones that you should watch out for as you get started:
Not Being Fully Prepared
If you are trading only some of the time, you don’t have the luxury of reacting to market events as they are unfolding. Instead, you will have to deal with the brunt of the effects much later on, often with you losing out on money. This is why you can’t ever afford to be caught off guard. You need to understand the events and factors that are resulting in the appreciation or depreciation of the currency pairs that you are dealing with. Now, trying to do this by yourself can be quite taxing and you may not be able to gather all of the information that you need. To give yourself an edge, try forex trading with firms such as ETX Capital. Here, you will find it easier to track market sentiment and to, therefore, set boundaries to avoid losses.
Failing to Rely on Markets Compatible with Your Schedule
There is a good chance that you work nine to ten hours a day. This means that you probably only have time before or after work, perhaps sometime during the middle of your workday as well. It is this limited trading schedule that requires you to be smart about the market that you are choosing. Rather picking one that seems like a good option, you need to decide on one that fits the free time that you have. So, if you live in the UK, trading on the London exchange may not make much sense. Instead, consider the New York exchange as the city is five hours behind London.
Avoiding Automated Platforms
If you only feel comfortable if you are placing trades yourself, this is completely understandable. After all, you are risking your hard earned money. At the same time, only trading when you have a free moment means that you are not grasping all of the opportunities that are available to you. Since you have such a brief window of time, you may find that there are some truly excellent trades passing you by. It is this reason that you should look into a platform that gives you the ability to automate your trades. This way, you can ensure that trades are being placed at opportune moments, as long as your set conditions are being met.
Risking Too Much Money
Far too many traders live by the saying ‘go big or go home’. If you want to make money in a smart way, though, this is not advice that you can listen to. You should never use a lot of your capital on a single trade, no matter how good or certain the outcome seems. Since there is always some percentage of risk involved, there is a chance for you to lose all of your money. This is why, early on, you have to decide just how much of capital you will set aside for each trade. As a rule of thumb, it is a good idea to avoid placing more than 2 percent of your total funds on a trade.
There you have it, all of the mistakes that you make as a beginner and part-time trader and how you can avoid them.