There’s no doubt that technological advancement has continued to make the forex market more accessible to novice and part-time traders, and in 2022, it’s becoming a popular way for a younger and less experienced generation to generate an additional stream of income, or, in some cases, eclipse their main stream entirely.
According to the latest numbers, the global FX markets reached a daily trading volume of $6.6 trillion in April 2019 (up from $5.1 trillion three years earlier), and in 2022, the market is estimated to be worth worth $2,409,000,000 (that’s $2.409 quadrillion) overall.
While the high-growth and speculative Forex market is appealing to new investors, it should, however, be noted that as many as 70 per cent of traders lose money through this market – so it certainly isn’t a pursuit for the faint hearted. Being a successful trader comes down to knowledge, experience and tenacity, as well as a high tolerance of risk – and those who have got the formula just right are reaping the benefits.
But for those new to Forex trading, can it really serve as the path towards creating the lavish and luxurious lifestyle you crave – and if so, what steps can you take to achieve success and optimise profitability in the marketplace?
Common mistakes made by Forex traders
The fact that 70 per cent of Forex traders lose money is a striking statistic, and might be off-putting to some. It highlights the market’s innate volatility and deceptive complexity – but if you’re willing to take the time to learn the ropes and develop your skill set, then you could potentially find yourself in the remaining 30 per cent instead.
Interestingly, such losses are caused primarily by a number of common mistakes and misconceptions. Here are some of the most common:
Failing to do your homework
This is a particularly common error when you consider the increased accessibility of the Forex market, as many newbies fail to understand the various macroeconomic factors and monetary policies that impact real-time currency values. This, in turn, can lead to basic trading errors and a failure to leverage market conditions to your advantage. So be sure to take some time to learn about the market and do your research before you start to put yourself in the best possible position for success.
Not using demo accounts
All Forex brokers now offer access to so-called ‘demo accounts’, which can be used to practice and hone your skill for up to six months before going all in and start making real-life trades. Demo accounts simulate real-time market conditions while enabling you to trade with virtual currency, bridging the gap between theoretical learning and practical market experience and thus, minimising the risk of you making mistakes with your real trades when it matters.
Risking more than you can afford
The Forex market is highly leveraged, and you can open and control positions that are significantly larger than your initial deposit – but doing so can be risky. Failing to recognise or control leverage can lead to disproportionate and unaffordable losses, causing huge damage within a relatively short space of time – so take it easy and take your time over your trades, to avoid making costly mistakes.
Trading emotively
The best traders are well-informed and highly determined, which means that they understand the underlying laws that govern change in the marketplace. Without having such weapons in your armoury, you’re much more likely to trade emotively and make knee-jerk decisions, creating a reactive outlook that often undermines your potential long-term profits – something that ultimately, should be avoided at all costs.
How to optimise profits and trade lucratively
These common mistakes provide a crucial insight for traders who are just starting out, as well as those who have dipped their toes in the water but are yet to see success. But the good news is that almost a third of Forex traders do begin to see profitability over time – so what is it that they are doing differently?
These tips, if utilised correctly, will help you to succeed in the market and optimise your profits, potentially improving your total earnings and leading to an improved lifestyle.
Be patient, disciplined and use demo accounts
A patient and focused period of learning underpins every successful Forex career, with online brokerages, webinars and physical books all reputable sources of crucial information. Once you’ve acquired a wealth of knowledge and begun to formulate viable trading strategies, you should target a reputable demo account and start to test these in corporeal market conditions.
Cap your leverage
While even reputable brokerages can offer leverage of up to 200:1, you should impose individual caps in line with your outlook, precise trading strategies and starting capital. Your level of experience and confidence should also inform the amount of leverage that you embrace, as this enables you to tailor your wider trading experience and minimise potentially seismic losses over time.
Manage your risk at all-times
On a similar note, it’s crucial that you use all of the tools at your disposal to manage risk and minimise the risk of loss. More specifically, it’s vital that you set logical and reasonable stop losses, which automatically close your positions once they’ve incurred a predetermined level of loss. This should both inform you that a trade signal is no longer valid and make sense within the surrounding market structure and conditions.
Trust your strategies
If you’ve invested time and effort into learning the market’s fundamentals and honing your trading strategies, it’s important to trust these within a relevant timeframe. For example, long-term position or swing traders should trust their knowledge and technical analysis to yield results over time, whereas scalpers or day traders should be able to rely on the insight that their targeted research has delivered.
The bottom line
Ultimately, there’s no quick fix or secret sauce that can guarantee success in the Forex market, let alone help you accumulate significant wealth and fund a luxury lifestyle – but by recognising the most common trading mistakes and the importance of gathering knowledge and understanding before you start, you can set yourself up for sustainable success in the marketplace. These tips and strategies will help you to minimise loss and optimise profits over time, resulting in long-term gains and profitability and laying the foundation for a rewarding career that can support the lifestyle you desire.
Disclaimer: Investing money carries risk, do so at your own risk and we advise people to never invest more money than they can afford to lose and to seek professional advice before doing so.
