Trading on the global foreign exchange market is an increasingly popular way for people to invest their money now. The easy access thanks to the growth of online trading and the relatively simple nature of how the market works make it an attractive way to make some extra cash.
While the experienced and successful traders make it look easy, there are in fact a few different things to know about when investing in the FX market. One very important factor to take on board is not being too keen or overeager when trading in this fast-moving financial market.
Being too eager is dangerous
Of course, you need to feel motivated to trade, but this is different from getting over-excited and rushing to place trades on currency pairs. The main issues that many traders face here are twofold. Firstly, they let their emotions get the better of them and dash to place trades on adrenaline when they would be better hanging back. Secondly, the dynamic nature of the FX market makes them feel that they should act instantly to avoid missing out on a successful trade.
In fact, jumping the gun to get involved often starts before a trade is even made!
Trading online will require you to sign up with an online FX broker. These platforms are where you place trades and manage your open ones. As such, they will hold your bank details and personal data. This makes it super-important to choose the one you will use carefully and after thorough research. Do not be so excited to start trading that you choose one at random! The best idea is to check out impartial online reviews of FX brokers to find the right one for you. One broker that many traders use is Plus500 – to find out more about this broker, have a look at this Plus500 review at ForexFraud.
How else can overeagerness harm your trading journey?
Once you have found the best online broker to use, there are other ways that being too keen can prove costly as a trader. Here are some of the most common around:
- Rash trading decisions –the golden rule when opening or closing trades manually is that you should only do so for rational and ideally predefined reasons. This could be, for example, that your trade has reached a predefined loss or profit level at which point you would calmly exit it. You should not be too eager to react to every move that the market makes or every new candlestick that appears. This will see you closing trades that could have won out overall and lose you money.
- Overtrading –trading too much is probably the most common way that being too eager is seen in FX trading. It is also to be avoided at all costs! The best professional traders do not open or close trades several times a day – many do not even enter the market even once each day! Once you have opened up a trade, let it run according to your trading plan and target profit/loss level. Only then should you think about getting involved again. In simple terms, with more trades, there is more chance to make a mistake and more chance to see your trading account slowly dwindle over time.
- Not putting in the groundwork –when you first decide to trade FX, the natural urge is to jump right in and start investing money. This is a classic sign of being too eager and will only result in failure as you do not know enough to be a success yet. First, you should learn all you need to about the FX market, set a reliable trading plan, and use a demo trading account to get a feel for how it all works. This gives you a solid platform to start trading properly.
- Too eager to ditch your system –the major part of any trader’s plan will be the trading system they use. This in effect sets out which pairs you will trade and how you will spot opportunities on the currency charts. The problem for many traders is that they get one bad trade and then ditch the whole system overnight as they believe it doesn’t work. This is a bad mistake! Do not be too eager to ditch an entire system for a few losing trades – to give your system the edge needed to win overall, you need to give it time to play out.
Patience and discipline are key to FX trading
This may seem like an unusual statement as the forex market is so fast-moving. However, it is this rapidly changing nature that means staying patient and disciplined will actually work out overall. By taking on board the above tips, you will be well on the way to doing this.