Forex trading is not like investing in the stock market, where you’re almost certain to make profits. You need to constantly be on your toes, or you’re destined to lose money. That said, Forex trading can also be highly lucrative if you know what you’re doing.
Forex millionaire Devin Sran is a prime portrait of what’s possible in this market. At only the age of 18, Devin is looked up to in the Forex trading community and has 387k followers on his Instagram (@devinsran).
Without further ado, let’s take a look at the 6 most common mistakes beginners make and how you can avoid them.
Putting All Your Eggs in the Same Basket
Warren Buffett once said,
“Diversification is protection against ignorance.”
Beginners often find it tempting to invest all their assets in one trade that they think is very profitable; it’s never a good idea. Unless you’re a gambler, losing a certain amount of money is worse for you than winning that same amount of money. By diversifying your portfolio, you can protect yourself against unexpected losses.
While we’re talking about diversification, it’s important to point out that taking multiple correlated trades does not count as diversification—it’s no different from investing all your money on the same trade.
To successfully diversify your portfolio, try to invest in as many trades that move independently from each other as possible.
Taking Larger Risk Than You Can Afford
It’s never a good idea to risk more money than you can afford to lose. You may get away with the first few times, but that would only motivate you to take bigger risks—and before you know it, the dice will roll against you, and you’ll lose. It’s much better to aim for consistency than to gamble in Forex trading. Even high-risk high-profit trades can be a bad idea if you invest a lot of your money into a single trade.
Crying Over Spilled Milk
You will definitely lose some trades. The mistake beginners make is investing more to a losing day, trying to make up for their losses. Reacting to losses emotionally is only going to result in more losses.
You should also consider having a stop-loss order for every trade. A stop-loss order automatically gets you out of the trade if the price moves against you by an amount specified by you. Having a stop-loss order eliminates the risk of losing a large amount of money.
