It is often said than 90% of forex traders lose their money during the first few weeks of trading forex. When you think about it, you may come to the conclusion that forex is not such a wise investment option after all. If only 10% of investors are making money, then there must be something wrong with forex as an investment alternative.


But things should not be simply viewed without analyzing the reason for the horrible statistics. Many forex investors come into forex trading carrying the extreme expectations that they can be forex millionaires overnight. And to do this, these forex investors are usually armed with the wrong attitude and misguided approach in trying to make money trading currencies.

So what are the 3 major mistakes newbie forex investors make which contribute to the high probability of them losing within the first few weeks of their trading?

Mistake #1: Overtrading

Most newbie forex traders are excited. They are excited to test out the strategies that they have been perfecting in demo trading. They are eager to know if the strategy which has proven profitable in demo trading can also prove to be profitable in a real account.

And so they trade. With every opportunity that they see in the market, they get the itch of entering a position so that they would not miss out on the opportunity. Trade after trade, they enter in every chance they see that they can trade. And before they know it, they are already holding too many positions in the market. The strategies that they have tested in demo trading in the past would have worked perfectly had they not been trigger-happy in entering positions in every currency pair that they see. Thus, they eventually overtrade. But when the open positions have added up, and the floating losses, which otherwise would have been in their acceptable levels, are now putting pressure in the newbie’s trading account, the strategy goes out of the window trying to save the account’s equity.

Mistake #2: Impatience

There are many times when a forex trader’s worst enemy is himself. He has his trading strategy tested. He has a trading plan prepared. All options are covered. But why do they still end up burning the account?

The answer may lie in not being able to follow the trading plans which are based on his trading strategy. This usually happens with newbie forex investors who simply cannot wait for the proper set up to occur and become simply impatient. The market cannot be dictated upon. It is the forex trader’s job to read the market, not anticipate its movements.

When a forex trader starts to get ahead of the market and try to predict what the market is going to do next without the clear indications that are used in technical analysis, that would be the start of the downfall of that forex trader.

Mistake #3: Over-leverage

Leverage is what makes forex profitable. Unfortunately, leverage is the same beast which makes newbie forex investors lose all of their money.

Many newbie forex investors come into forex trading with the misplaced notion that forex can make them rich overnight. Mathematically, yes that is possible. And it is leverage which makes it possible to multiply your account several times in a short span of time. But statistically, it is highly improbable because the double-edged sword that is leverage can also wipe out your account’s equity in no time.

Greed and improper capital management would eventually lead to over-leveraged positions for a forex account. And with this happens, it is not too far to expect that the dreaded term “margin call” is that far behind.

Newbie forex investors should learn that to be able to get rich in forex, the proper attitude should be observed. To stay in the game longer, the correct goals should be targeted and the strictest of discipline should be followed. Only then can forex lead you to your financial freedom.

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Tags: forex newbie, forex newbie mistakes, forex psychology, forex tips, major mistakes, traders mistakes

Posted in Forex Tips