Most novice traders start out hoping to make a lot of money in the markets, and while this can be very motivating, it's best to learn how not to lose money rather than trying to make a quick buck.
It is a fact in the industry that a large number of novice traders fail and quit trading within two years. However, there are also those who start their trading careers on the right footing after going through a long learning process. In this issue, we mainly talk about why most novice traders fail, and how to avoid some pitfalls?
Unfounded beliefs about the foreign exchange market
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When most novice traders first discover the forex market, they are over-excited because it seems so simple and full of excitement. The only thing they can think about is making big money, and they open an account expecting to make it within a few days. It's a pity that this feeling is illusory when they are often still surrounded by a lot of false information.
While it is true that it is possible to make real money trading Forex, you must realize that it will not make you rich overnight. If so, everyone succeeds. In fact, it is a serious career for those who are serious about taking the time to develop their skills in order to achieve the desired goals.
Most novice traders enter the market unprepared due to false beliefs. All they have is the expectation of making money, but they have no plan, strategy and risk control.
Fear of Failure and Poverty
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After a few losses, fear sets in, a basic emotion rooted deep in the human psyche. The seemingly aversion to trading losses actually comes from the fear of poverty, which will affect the decision-making in trading. Most losing traders lose money when they should be making money, and make bad decisions when they should be waiting, based on fear.
Fear interferes with the effectiveness of powerful systems. Stasis can be frustrating when you are afraid to seize the opportunities that are unfolding, and it can also prompt you to close profitable trades early, which will damage your self-confidence.
The best way to avoid fear is to learn to stick to your trading system.
tight budget
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Losing money is one of the main reasons why novices exit the market prematurely. Losing money is part of the "rules of the game" for all traders. In order to sustain losses that exceed profits, you need sufficient funds.
To make matters worse, new traders often tend to use high leverage to hide past losses, which can lead to more serious losses. Instead, having more capital to help you trade with minimal leverage is the way to go.
From time to time, we come across traders who fund their accounts on credit. It seemed like a good idea to raise money for the deal, but the risks involved were too high. Loans may be suitable for other investments and expenses, but for novice traders in the foreign exchange market, loans should be excluded.
A tight budget in foreign exchange trading is a disaster that can break out at any time, and it is difficult for traders to avoid emotional trading with a limited budget.
lack of discipline
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A lack of discipline in forex trading can lead to emotional decisions that can lead to serious losses. While there can be some lucky undisciplined traders who make money, it is usually short-lived and could cost them a lot of money if they continued in the same way.
The main purpose of having a planning and trading system is to ensure you get the best possible trades. Your trading system should be able to inform all trading decisions, just like the business strategy a good trader relies on. If planning and trading systems are set aside, forex becomes gambling without any guarantees.
Summarize
As humans, emotions run deep in our bones, and sometimes it's hard to put them aside. But you can gradually build confidence by learning the knowledge of foreign exchange trading and making a trading plan.
When a trading strategy works, you have to strictly follow it and make sure to update it regularly, and of course the strategy must include a normally foolproof risk control component.
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