4. Ignoring Unrealized Profit/Loss
If you have open positions, then the balance doesn’t give a clear picture of the state of your account. Many beginners think that if a trade is not closed yet, then the loss on it is not real. This forces them to hold their position for longer and increase their losses.
When you look at your account, consider all of its components, including unrealized profits and losses. Open losing positions can cause irreparable damage to your investment. Due to the falling equity level, your positions may start to be closed by Stop Out one after another. As a result, a fairly large balance might turn to zero.
5. Unreasonable Self-Confidence
Forex doesn’t tolerate traders with high expectations. Many come straight away aiming at 100% results in trading. Others develop overconfidence after one or more profitable positions early in their trading careers. And this is exacerbated if the victories were big enough.
Easy profit can give the false impression that it’s very easy to make money in Forex. Overconfidence leads traders to open more and more unverified trades which leads to a complete loss of capital. And repeatedly.
Even if you are fortunate enough to earn a large amount from the start, stick to your plan:
- Reserve the maximum volume of transactions
- Only trade on a clear trading signal
- Confirm each signal one or two ways, etc.
6. Excessive Trust in Third Parties
No matter how competent a trader or analyst may seem, don’t follow his advice blindly. These signals might simply not respond to your situation:
- Different timeframes
- Excessive risk level
- Inappropriate amount of capital, etc.
You can use the instructions of other traders and analysts only as a guide. And each recommendation needs to be tailored to your trading plan.
Also, if you follow someone else's instructions constantly, you won’t learn to trade on your own. Your earnings will always depend on strangers. This way you can’t gain the financial independence available on Forex.
7. Trading with Borrowed Funds
One of the main rules on Forex is not to trade with money that you cannot afford to lose. The funds you borrow don’t really belong to you. All you will think about while trading is how not to lose them and how quickly to get enough profit to return the loan and interest. Your trading decisions will be driven by emotion. Most of the mistakes on Forex are made precisely because of emotional trading.
What to do? Wait. Find an additional source of income to accumulate sufficient funds for your initial investment. Trading with personal funds is safer. You will make informed decisions and quickly start gaining your first profits. And I wish you the best of luck with that!