Starting out on your Forex journey is very exciting, but it can all come crashing down if youre not careful. All too often new traders will fall into the same pitfalls, overestimating their ability and making decisions based less on analysis and theory and more on feeling and emotion. To make money from Forex, in the long run, requires patience, critical thinking and a keen understanding of the markets. Many people try but few succeed. Here are some reasons why your last Forex experience didnt go as well as you might have wished.
Whether you are beginning with $200 or $20,000, managing your bankroll appropriately is essential to long-term survival. Many new traders may make a successful trade and let that euphoria go to their heads. It is not uncommon to make a profit which is followed shortly by a larger loss, mitigating your progress. These losses can be very demotivating to a new trader as they can put you in a worse position than if you had never attempted to trade. However, losses need to be prepared for, it is very difficult to avoid them if not altogether impossible in the long-run. This is where a risk management strategy comes into play. Implementing a system that uses appropriate bet sizes and cuts losses quickly, while adding to your winning trades will allow you to stay afloat and hopefully make substantial returns in the long run. Of course, this is easier said than done.
Becoming emotionally invested in your trades can be very detrimental to the health of your account. As you become more invested, both financially and mentally, it is possible to become very attached to the success of your account. This does not always serve you well, ignoring analysis and theories in favour of gut feeling can be disastrous. Of course, there will be times when you go against the market and can make it work, but on the whole logic and reason will likely prevail. This can also lead to emotional decisions like throwing money into a risky trade to make back what you lost. Trading in the long-run requires discipline and sticking to your strategy (when its backed by statistics and analysis) will generally serve better than rash decision making.
Another reason why your last Forex account failed, was that you didnt commit to learning enough about Forex to make the most of it. Like anything, Forex takes time and dedication to become good at and is a skill that many people do not acquire. Learning different chart patterns, indications in the market, and how to read economic events takes a long time, but hopefully, will all pay off. When first starting out in Forex it is easy to assume that it is a way of making a quick profit, and while thats possible, it is far from the reality for most traders.
When you next set out to trade Forex in the hopes of creating a long-term cash flow or just to trade on the side, remember that it will take time. Time to get accustomed to how to trade, time to find a strategy that suits you and your needs, and time to see your account rise in value.