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The exchange rates are sometimes relatively irrational, so that it is sometimes difficult to make a correct assessment of how the exchange rates will develop in the following days or weeks. Basically, the foreign exchange trade is very volatile and this is especially true when at least one currency from a currency pair to the smaller foreign currencies.

Economic and political developments also need to be monitored more closely, as the development of exchange rates also depends on them.

Beginners or novices sometimes react confusingly to the available market data. Especially if results occur there that were not expected and these data are then interpreted inaccurately or unrealistically, this can lead to major misjudgements. For this reason, it is of great importance, especially for beginners, to gain experience in the area of demo solutions, in order to then implement them correctly when the use of real money becomes serious.

Relatively extensive effort to acquire knowledge

The effort can be very extensive here. It also requires a lot of experience to be able to act correctly. For this reason, more extensive prior knowledge is also indispensable. Without the existence of a good basic knowledge should not act.

To do this, the trader must be able to evaluate the most important indicators for trading. He must also be able to read bar charts, line charts or candlestick charts.

Partly the acquisition of this knowledge is also connected with costs, which must also be considered.

Foreign exchange trading is very time-consuming

Due to the hours of presence on the screen, foreign exchange trading is very time-consuming, so that the exact course of the exchange rate can be kept in view and the best exit or entry opportunities are not missed. Likewise, a high volatility then also causes a great effort and a high level of stress for the person active there. If there is a low volatility, the course of the share price can lead to boredom.

If an order is set, you have to wait. Preparing a trade with a fixed strategy also takes a lot of time. Here the use of a trading software with alarm function is very helpful. This alarm function informs the person when the price has reached a certain position and when he should intervene.

Overconfidence

Many setbacks for the customers often come when they are convinced that they have developed a lucky hand for use in the foreign exchange market. For example, a participant in 4-5 trades continuously used a reasonable trade size, which in turn led to nice profits. Here then no self-overestimation situation may arise, but one must remain relatively modest also in such situations, because a self-overestimation often brings the customer in trading traps and then not or only with difficulty comes out again.

Such overestimation can also lead to trading with excessive leverage, or it can make you stick to losing trades because the client has already traded with such an approach several times. This in turn can lead to a dead end and it is better to stop such trades than to hold on to them for too long.

Avoidance of the gambling fallacy

If the customer has trouble taking losses, there is a risk of gambling fraud. This is a fallacy or tendency in which the trader or customer complains that he is entitled to a win in a trades by right because he has suffered a large number of losses. This way of thinking can then lead to a doubling of the stakes or to a too high leverage effect on a small capital base. The consequence of this could be a massive increase in losses, so that trading then becomes a kind of gambling.

Also for this reason a loss trade should not be doubled just because one has the feeling that a profit should finally come now. Instead, it makes more sense to continue working with a manageable amount of money until the security and the feeling for the market comes. Furthermore, the stake should only be increased if reasonable profits have already been made and the account has grown in the plus.

The risk of trading directly on the Internet

Internet-based trading systems are also exposed to risks in the event of software, hardware or Internet connection failures. An online broker can neither control the routing via the Internet nor the signal reception or the configuration of the receiving devices. The same applies to the Internet connection, which cannot be controlled by the online broker either.

In the worst case, this can lead to considerable delays, communication failures or distortions when trading takes place over the Internet. The fact that the online broker himself has a system failure has occurred only in the fewest cases. Here, broker companies have contingency plans and systems at partner companies to reduce such failures to a minimum. In an emergency, trading via telephone is also still possible.