When you’re new to trading there’s a lot to learn and, inevitably, many things can go wrong. Most of the mistakes that inexperienced traders make are the same. Familiarising yourself with them could keep you out of trouble and set you on the path to a successful career.
Failing to plan
Before you start trading it’s important to think about your aims. Of course, you want to make money, but would you prefer to accrue a lot after 20 years or a small amount every week? What degree of risk can you afford to take? How important is security? Answer those questions and you can use the answers to set out a clear structure for your trading. Then you will need to stick to it.
Choosing a bad broker
There are some brokers out there that are straight out scammers and others that offer a very poor service or charge unreasonably high fees. To stay safe, check that the brokers you consider are properly registered and that they have good reputations within the trading community. Check out the list of best forex brokers by Forexfraud.com – they all have pros and cons but what matters is finding one that’s right for you.
Looking for shortcuts
Far too many people go into trading expecting to make money fast. It’s a lovely idea but the reality is that there’s a lot of hard work involved. There are also a lot of people out there who will offer you supposed winning tips, foolproof systems and the like, which only ever result in them winning and you being fooled. Be wary of anything that sounds too good to be true and don’t be charmed or bullied into letting strangers part you from your money.
Forgetting about fees
When you’re looking for good trading deals or signing up to bona fide tips or financial news services, be alert to the possibility of hidden fees. Sometimes these attach to individual trades which is okay if you’re buying and selling stocks but not so good if you’re dealing with forex, where they can add up very fast. Pay special attention to withdrawal fees which sometimes make it difficult to recover your money or close your account.
Being scared to try
Once you’ve got everything set up, it’s time to start making your first trades, and this is where many people freeze. It’s healthy to be cautious but too much caution can make it very difficult to make gains, and second-guessing yourself can lead to errors of judgement. Remember that if you’ve made a solid plan and you stick to your rules, you should be fairly safe. Sometimes you’ll have bad luck, but you can also have good luck – the only thing guaranteed to get you nowhere is not trying.
Acting on impulse
Just as you can struggle with being too nervous, you can get into trouble by being too impulsive. It’s important to do your research thoroughly before you trade and to make sure you don’t get caught up in the hype attached to some assets. You can still take advantage of good deals – just make sure that they’re really what they appear to be, and stay within your trading limits.
The human brain has evolved to be good at spotting patterns. Unfortunately, this extends to patterns that aren’t actually there or don’t mean anything. After you’ve been trading for a while you may start to believe that you can see a secret pattern that illuminates the way the whole thing works and can get you to the very top if only you spend all your money on it. Beware! Falling for this is almost like scamming yourself – if there were really such a secret thousands of others would have found it by now.
If you take a look at the most successful traders, you’ll see that they’re not necessarily the people who trade all the time. It’s easy to be sucked into a habit of thinking that the more you trade, the more money you’ll make, but that isn’t true. What’s more likely is that you’ll become overtired and start making mistakes. Trading has a lot in common with computer gaming and it can get you hooked in much the same way. Take a step back and only trade when you know you’re in control.
By being alert to these risks, you can significantly increase the chance of being one of those traders who makes it. You won’t necessarily make much money in your first year because it takes a while to develop trading skills, but you will be all set for long-term success.