There are plenty of places that tell you what you should do when you’re trading Forex online, but not as many telling you what you shouldn’t. Below are a few things to be wary of…
Don’t… limit your trades
When you first start to trade, you’ll quite naturally pick just one currency pair to trade with. And because you’ll end up spending more time following and analysing that currency pair, it’ll become very familiar. You might even be a bit reluctant to trade on other, less familiar, pairs. But it’s very important to branch out.
If you choose only to trade on one currency pair, you’re effectively boxing yourself in. By not branching out you’re putting yourself at the mercy of the currency prices and you might find yourself being forced to take trades when the market isn’t favourable. Instead, try taking what you know about trading on your favourite currency pair and applying the principles to other currencies. You should find that there are plenty of other opportunities out there.
Don’t… get led astray
Trading experts and analysts get their reputation for a reason. They’re generally experienced, successful and know more than most about trading. So when they stand up and tell us about what trades to go for, we should listen diligently and follow all of their advice to the letter, right? Well, possibly not…
The sort of information provided by experts and analysts should be seen as advice, not the absolute gospel truth. Experts and analysts aren’t your personal broker working on your behalf. They don’t know about your individual account or what your own trading strategy is. What they offer is valuable because it adds to your existing knowledge and helps form more of a picture of the market so by all means listen to their advice, but be sure to apply it to your strategy in your own way. Online Forex trading puts you in complete control of your decisions – you shouldn’t let anyone take that final decision away from you. After all, just because someone else is doing it doesn’t mean you should too.
Don’t… search for perfection
Ever since trading began, people have been searching for the ‘perfect system’ – a sure-fire way to win trades. Unfortunately, such a system probably doesn’t exist. If it did, surely everyone would be using it by now.
The reality is the Forex market is a wildly fluctuating global system, with innumerable ways in which it can change. It’s not the kind of thing that can be beaten or manipulated (at least, not in any legal way). You can reduce your risk and you can certainly win trades, but you can always lose them too. So, in lieu of a perfect system, what you’re left with is good old fashioned hard work. That means taking time to become educated about trading, using analysis tools, considering risk and making the most of resources at your disposal. Trading wisely is as close to a perfect system as you should need.
It’s tempting to want to use every analysis tool under the sun – and there are hundreds – to try and figure out which trades to go with, but it’s not necessarily the best approach.
Contrary to what you might think, many traders that make a full time living from online Forex trading don’t tend to go overboard with their analysis. They know that although analysis helps in a lot of ways, overanalysing can be detrimental; it’s difficult to sustain, your concentration will waver and you’ll quickly get overwhelmed by possibilities. Experienced traders know the important things to look out for, so they don’t need to spend much time analysing. Instead, it tends to be less experienced traders that spend more time relying on tools, charts and data. Of course, learning how to use the tools and analysis is a crucial part of understanding Forex trading, but as you get more experienced you’ll form more of an intuitive feel for trading that’s less dependent on the analysis tools.