The opportunities for gains exist, and even in abundance, on the foreign exchange market. Before starting on the Forex, one should know that several pitfalls determine the course of a trader wishing to achieve trading objectives. How to avoid them?
External pitfalls: the tools offered by brokers
The pitfalls of the Forex market sometimes come from the tools provided by brokers for carrying out operations on the foreign exchange market. No matter what Forex advocates say, the forex market is home to reliable brokers and unsavoury brokers, who rarely adhere to the security guidelines set by regulatory authorities.
The most common difficulties relate in particular to the obsolescence or inadequacy of the trading tools with the trading methods used by the forex trader. Some platforms that allow the scalping technique do not have sufficiently responsive software that is truly capable of executing their clients’ buy or sell orders without delay. The problems of requoting or “slippage” result largely from the inadequacy of the tools offered with the strategy used by the trader.
Restricting trading bonuses, variable and unlimited spreads, and hidden fees are all pitfalls that every trader must learn to detect to succeed in the forex market. To detect these pitfalls, read the brokerage reviews, which are a great source of info, such as Lexatrade review.
The trader, the main obstacle to his own success
However, the main pitfalls of Forex trading are hidden in the trader himself, in his way of approaching the market. Some traders focus on the idea that the Forex contains almost unlimited possibilities of gains and therefore use trading techniques that are too risky given their knowledge and experience in the Forex market.
A significant leverage effect is one of the most recurrent traps. In the same vein, using too much capital on a single trade and maintaining a losing position out of stubbornness are all obstacles that any trader must learn to circumvent or avoid if he wants to last in currency trading.
Control your emotions
Whatever the outcome of your trading activity, you must keep your emotions under control. Not controlling them can lead you to overtrading, which results in losing even more money. To be honest, some stress level is unavoidable in trading, and you need to keep that in mind. Fortunately, you can always simulate the trading process using demo accounts before starting the real trading process for real money.
Choosing the wrong currency pairs
This tip is primarily dedicated to beginner traders. When you start trading, you are amazed by the number of currency pairs available in the Forex market. And some are prone from the very beginning to experiment with all kinds of pairs: major, minor, and exotic. This is a mistake. As a beginner, it’s highly advisable that you start with the major pairs such as USD/EUR, EUR/GBP etc. As you can see, these are pairs emerging from the countries with the most stable economies. Major pair’s markets are very liquid, so you don’t put your money at risk and have more opportunities when investing.