10 common FX trading mistakes that could prevent you from making a profit

Forex trading is a process that requires constant improvement of both the trader’s skills and strategies. Yet, each trader, in the process of forming his professional experience, goes through a certain series of mistakes.

There is a category of basic mistakes that almost all newcomers face when entering the market, which makes their first Forex deals rather costly. This group of mistakes should be considered separately, as they are quite typical obstacles to effective trading and can be avoided by paying attention to key psychological, technical, and experience factors. 

To make your journey into the world of trading more efficient, taking into account the experience of professionals, in this article, we will look at the common mistakes of beginners and give some tips for a smooth entry into the Forex market.

The most common mistakes of a Forex trading newbies

To minimize trading mistakes, they should be identified and classified. Some mistakes lie on the surface and immediately catch the eye; for example, trading against the trend, removing stop-losses, and so on, and there are more complex ones that can identify more professional market participants: untimely adjustment of the trading system, inability to notice the accumulating market changes, incorrect work with transaction statistics, and others.

All trader’s mistakes can be divided into four groups: 

• technical mistakes
• psychological mistakes
• fundamental mistakes
• risk and money management mistakes

If technical mistakes can be identified immediately, just by looking at the history of completed transactions, then fundamental ones lend themselves to more complex analysis. At the same time, during periods when the listed groups of mistakes have been worked out, the trader begins to sharpen risk and money management. Moreover, correct risk and money management begin to influence all other aspects of trading.

Top 10 worst trading mistakes in the Forex or CFD markets

From each group of Technical, Fundamental, Sentiment, and money management mistakes let’s take a closer look at one or two most common ones among novice traders.

Trading without a pre-planned strategy

Having a pre-planned trading strategy is an important key to becoming a true professional. Drawing up and strictly following a trading plan can help manage both the emotional and technical risks associated with Forex trading. Even a trading system in which you are not completely sure, but which has clear signals for entering and exiting transactions with the obligatory observance of its algorithms, is better than its absence. In addition, even if the trading operations were not entirely as you expected, due to their constant analysis, the trading strategy can be finalized and improved, but if it is absent or the signals generated by it are ignored, one should not expect a favorable outcome.

Trading against market trends

Trading against the trend is one of the most common mistakes novice traders make: incorrectly predicting a significant price movement with the hope of opening positions in the opposite direction, which may not happen leading one to possible losses.

This mistake stems from the inability to wait for the planned trading signal feeling that right now you need to enter the position, otherwise it will be too late. Also, the occurrence of such a failure may appear due to a banal misunderstanding of the principles of building a trend, which is corrected by reading the relevant literature and gaining experience.

Trading only in short timeframes

Trading in short timeframes includes intraday work, attempts to close deals on hourly or 30-minute timeframes, and in many cases even on 5-minute and 15-minute ones. This method of short-term trading is called scalping and it constantly attracts the attention of inexperienced market participants who want to work and earn daily. It is worth saying that it is potentially possible to earn in this way, but only after you have trading experience behind you. The fact is that intraday work is fraught with great risks, since leverage is required for tangible earnings, and strategies here are replete with a large number of false signals, which is why there is a high probability of concluding a whole series of failed transactions.

Forex trading without demo practice

Forex trading, like any other business, needs to be learned because here traders risk their real funds. Trial and error in real market conditions are not the best way to acquire and develop the skills of a professional. Instead, the most effective way to become a proficient market participant is to gain basic knowledge by practicing trading strategies on a trading demo account. 

Trading on a demo account will allow a beginner to understand the influence mechanisms of market factors on prices, put into practice theoretical knowledge of technical analysis, and develop their own or test a borrowed Forex strategy.

Also, a demo account provides an effective opportunity to acquire and expand the attainments necessary for productive trading on the Forex market while risking only virtual money.

Using too large leverage in Forex trading

Leverage is a tool that can cause both a good potential return with a fairly small investment and a solid loss if you choose the wrong size of a trading position. Beginners should use leverage with extra attention and caution testing their strategies on a demo account and gaining some experience in advance.

Learn about Forex marginal trading with leverage

Incorrect risk-to-reward ratio calculation

Forex trading for beginners without proper psychological preparation releases adrenaline and can be addictive, which encourages them to enter positions with poor risk-to-reward ratio.

A good trading strategy should be at least three times your expected loss if the trades turn against you, at a ratio of 70% winning trades to only 30% losing trades. Newcomers can test and determine the risk-to-reward ratio on a demo account. If you calculate the possible earnings figures in advance, you can often find that, for example, the expected take-profit is equal to the same number of points as the possible loss. Accordingly, it makes no sense to open such a position.

Forex trading without setting appropriate stop-losses and/or take-profits

Trading without a stop-loss is like letting losses run indefinitely, and trading without profit targets can quickly turn a winning trade into a losing one.

In each price fluctuation, the beginner usually sees signs of a close price reversal, when the loss on the transaction begins to decrease, but the reversal may not occur, which can lead to waste of the entire deposit.

A trader can avoid such situations using a stop-loss order, thereby limiting his possible losses and getting the opportunity to plan his further actions.

The same applies to the take-profit order. Having decided on the level at which it is worth taking profit, the trader again eliminates the emotional component of his actions. Of course, one can regret missing out on more profits, but it is easier to cope with this if you already have a fixed amount of earned money on your deposit.

Emotional Forex Trading

One of the most common mistakes made in Forex trading is getting emotionally involved in making trading decisions. Emotional trading leads to impulsive buying or selling of assets, which is why traders can lose money. Trading within a predetermined trading plan helps control emotions and focus on long-term goals.

Forex trading based on news releases

Trading during news releases requires additional trading skills, especially if the trader does not understand the impact of news on price formation. In addition, trading after the announcement of the news makes it less relevant since the market has already priced in the news, and one may start the wrong deal. Moreover, while trading during news releases, market participants may experience slight slippage and are more likely to enter a position far from the target price.

Choosing the wrong terminal and a Forex trading service provider

Many brokerage offers on the Forex market provide different trading conditions and terminals for making transactions. The right platform should provide solid educational resources, access to news, a reliable real-time feed, an easy-to-read trading interface, and a variety of trading signals. The software should also include access to major Forex and stock trading instruments that you may be interested in. In addition, when choosing a brokerage company, you should pay attention to its regulatory bodies and reputation in the Forex market.

Tips to avoid common Forex trading mistakes

First of all, you need to choose a specific trading strategy and strictly follow it, build a trading plan, and conduct Fundamental and Technical analysis of the market before the start of each trading session. Self-discipline and strict adherence to a trading plan are reliable ways to overcome your emotions and make only balanced and rational decisions.

On every trade, you need to limit your losses by using stop-loss orders. If it is obvious that the trend has changed in the direction opposite to the position, you should not hope for a price rollback, otherwise, you can lose the entire deposit. It is better to set in advance and observe the limits of the allowable loss for each trading period: 1 day, week, or month. 

In the case of take-profits, it must be fixed in parts through each specific interval of price movement. Fixing a part of the position not only allows you not to be complete without earnings in the event of a price reversal, but also reduces the risk, since, after partial fixing, the position size decreases and, accordingly, stop-loss losses will be less. Furthermore, if the price continues to move in the direction of the position, you will not have FOMO (fear of missing out), because the profit on the rest of the position will continue to grow.

In addition, you need to correctly calculate the size of the leverage, based on your trading strategy, risk, and money management. When determining the size of the trading leverage, first of all, it is necessary to take into account the average market volatility, since leverage significantly enhances the amplitude of price fluctuations. Beginners in trading should not trade with a leverage of more than x5.

Besides, it’s better to control risks and determine in advance the maximum loss for yourself in one transaction. Try not to succumb to emotions or deviate from the chosen trading strategy. If you are an emotional person and cannot contain the panic of losing trades or the euphoria caused by a short success, then use the above-mentioned risk management tools that monitor compliance with risks and do not allow them to be exceeded, regardless of the market situation.

Last but not least, be sure to test your strategy on historical data or a demo account and take into account all the factors (liquidity, commissions, spread) that can potentially reduce the earnings from the strategy.

Social and Copy Forex trading to avoid common mistakes

To minimize mistakes in the Forex market, beginners can take advantage of the experience of professional colleagues with the help of such tools as Social and Copy trading.

Social and Сopy trading are two concepts that are often used in combination but have some basic differences. When using Copy Trading, market participants choose a professional trader who provides his account so that beginners can automatically copy his deals. This allows Forex traders without deep knowledge and experience to close trades like an experienced one according to the size of their deposit. In addition, they can manage copied trades and close them manually if needed.

Social trading, in turn, allows not only copying transactions, but also interacting with other users, asking questions, evaluating their effectiveness, and much more.

AvaTrade one of the largest Forex and CFD platforms has a wide choice of some of the most well-established copy trading services such as ZuluTrade with a wide variety of signal providers; Duplitrade, where it is convenient to copy trades from several signal providers; AvaSocial to communicate with other market participants and automate your transactions, which is perfect for both beginners and experienced traders.

Another international broker, HF Markets, provides an opportunity to open an HFcopy account for both trading strategy providers and subscribers who join HFcopy. Providers can open an HFcopy account to build their subscriber list and trade in exchange for performance rewards. At the same time, subscribers, having opened an account, will be able to deposit funds and start copying the trades of their chosen professionals.

Best VPN for safe Forex trading

Forex trading can be associated not only with mistakes of a psychological, technical, and fundamental nature but also with complete trust in your Internet provider or public Wi-Fi, through which your personal and private information such as passwords, logins, or payment details can leak into the network. To avoid such crucial mistakes, many experienced market participants recommend using Top VPNs for Forex that secure your data to access the trading terminal when connecting through unprotected networks and unblock brokerage sites that are unavailable in the country for one reason or another but still working with their customers.

One of the leaders in providing VPN services is PureVPN, which uses a variety of encryption protocols including PPTP, L2TP, SSTP, IPsec, IKEv2, the most secure protocol OpenVPN, and the recently introduced and fastest Wireguard, which means that any activity on the network will be protected using the latest innovations in this area. 

Click the button below to get the best VPN deal for Forex trading: 

PureVPN is not limited to security features and also provides separate servers for games, torrenting, and streaming services. In addition, a large number of global servers in over 78 countries provide fast access from anywhere in the world.

Top trusted brokers for Forex trading

To achieve the maximum result in a trading career, it is necessary to approach the solution to trading mistakes, namely, in a complex manner.

To hold a stable result for a long time, you need to master Technical and Fundamental analysis, test your strategies on a demo account, and do not forget about discipline. Also, do not ignore risk management tools such as stop-loss and take-profit.

It should also be noted that in the Forex market, traders can open several accounts in order not only to try their strategies on different trading platforms but also to try various instruments and collect all kinds of Forex bonuses up to 100% on the first deposit.

Sign up, verify accounts, and start trading with the Top Forex brokers below to compare marketplaces, pick up multiple instruments, and check order execution times.

Exness Forex trading

Exness is an online brokerage platform for trading a wide range of instruments including currency pairs, stocks, indices, metals, energies, popular Cryptocurrencies like Bitcoin and Ether, and others.

Market participants with different needs will be able to find a suitable trading platform for themselves, such as MetaTrader 4, MetaTrader 5, or MetaTrader WebTerminal. The broker has also developed a mobile application for iOS and Android to keep abreast of the latest trends. In addition, Exness is one of the few companies that offer to use a VPS server in order to increase the connection speed and save money in the event of a sudden power outage or other factors.

Traders can enter the market with standard retail, and professional trading accounts, as well as a demo for improving their skills and practicing their strategies without worrying about their own funds, but by using virtual ones.

Deposits and withdrawals of funds can be made through bank transfers, cards like Visa and MasterСard, Bitcoin, Tether, Perfect Money, NETELLER, WebMoney, and Skrill.

Exness is registered in several jurisdictions and is licensed by FCA, CySEC, FSCA, FSC, FSA, and others, allowing it to serve clients worldwide. Try trading with Exness right now using our dedicated button below.

Plus500 FX trading

Plus500 is one of the leaders in providing CFDs on ETFs, currency pairs, commodities, stocks, indices, and other financial instruments (over 2000 in total), as well as a trading guide and all of the tools necessary to make deals more efficient.

As for terminals, the company offers Web Trader for Windows and macOS, as well as mobile versions of terminals for smartphones and tablets.

Accounts are classified into two types: real and demo. The latter is unlimited so you can work out new strategies, try unfamiliar tools, and test advisers. Clients can top up accounts using Visa and MasterCard as well as popular e-wallets such as Skrill and PayPal.

Plus500 works with traders worldwide and is regulated by FCA (UK), CySEC (Cyprus), SFSA (Seychelles), AFSL issued by ASIC, FSP issued by the FMA (New Zealand), MAS (Singapore), and Authorized Financial Services Provider license issued by the FSCA (South Africa). In addition, the broker provides most of its services for free and will notify you in advance on rare occasions when its services require additional payments. Try trading with Plus500 by clicking on our button below.

82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

NAGA Markets Forex trading

NAGA Markets is an international broker that offers traders over 950 instruments and assets, including currency pairs, stocks, indices, commodities, and ETFs.

NAGA Markets is a reputable broker known for providing numerous Copy trading advantages. NAGA Autocopy is an innovative feature that allows you to automatically copy the best traders on the platform and learn from their strategies.

Among the accounts, market participants can find unlimited demo accounts, real, and professional. NAGA clients can top up them by bank transfer, using payment cards, through the electronic payment systems Giropay, Skrill, Neteller, Paysafe Card, and Klarna, as well as with Cryptocurrencies (Bitcoin, Ethereum, Dash, Litecoin, Bitcoin Cash, and NAGA Coin).

The company has received licenses from proven and trusted regulators such as the FCA and CySEC. Try trading with NAGA and get a special offer from TopForex.trade by clicking on the button.

AvaTrade Forex trading

AvaTrade is one of the best old trading platforms for trading multiple financial instruments such as CFDs, Cryptocurrencies, commodities, stocks, exchange-traded instruments (ETFs), bonds, and market indices on favorable terms with tight spreads and no hidden fees.

Newcomers can start with a demo account with a virtual balance of $100 000, and then switch to the real one that has stop-loss order, take-profit, and AvaProtect features.

The company is distinguished by a variety of trading platforms that meet any needs of demanding market participants. So traders can choose MetaTrader 4/5, WebTrader, AvaOptions, and AvaSocial – a CopyTrading platform, AvaTradeGo, and Auto Trading – platforms for automatic trade, including ZuluTrade and DupliTrade. The AvaTrade platforms are also available on mobile devices. The company supports Android and iOS (iPhone and iPad) systems.

AvaTrade is a registered and regulated broker that complies with the most stringent requirements of regulatory bodies such as MiFID, ASIC, Japan FSA and FFA, FSB, IIROC, and FSCA. Check all the available AvaTrade features and enter the Forex market by tapping the bottom below.

eToro Forex trading

eToro is one of the very first brokers to come up with the idea of ​​Social and Copy trading. In addition, many assets can be traded through the broker platform, such as many international stocks, indices, precious metals, commodities, currency pairs, and exchange-traded instruments (ETFs).

Clients can work on the broker’s trading terminal, which is available in two versions: in a personal account, as well as in the eToro app for Android and iOS. In the app, you can deposit and withdraw funds, trade, and candlestick charts, as well as copy trades, and chat with other members.

eToro has two types of accounts: Retail and Professional. The former has negative balance protection and includes the CopyTrader feature, while the latter is known for its wide leverage. In addition, beginners can always test various trading strategies on a demo account.

eToro accepts clients all over the world and maintains the transparency of all transactions, which is confirmed by the received licenses from such demanding regulators as the FCA, ASIC, and CySEC. You can try trading with eToro right now and get a special offer from our website by clicking on the button below.