By: Sara Patterson
While everyone who has spent more than thirty seconds studying Forex knows that it is a lucrative market with endless possibilities for profit, what most people don’t know is that if you are not careful, it could be a very dangerous one too.
Along with its three trillion dollars daily turnover, its high leverage, and flexible trading conditions, other unique characteristics of the Forex market include the proliferation of scam services and brokers who will take your money and run.
It is therefore crucial that you take control of the situation before you start trading, learn the risks and how to minimize them while maximizing your profits.
The following are ten quick tips 90% of Forex traders are not told and thereby end up losing their money:
1. You will not make millions, at least not right away: Yes, I know the broker said you would, but he/she lied to you. The stories you heard about people making millions on one trade are about as likely as winning the lottery, it aint gonna happen. Do not aim for that, do not expect it, and you won’t be disappointed. If you are able to make steady and consistent profits, you are in good shape and off to a great start.
2. Leverage equals danger: The thought of being able to trade $100,000 is exciting, no one denies that. However, what most people do not realize until it is too late is that the high leverage that enables you to trade those numbers can also make you lose all your money in one shot. Stay away from high leverage in the beginning; it is a better tool once you are a trained and experienced Forex trader.
3. A demo account is your best friend: Every broker nowadays has a demo account and if the one you are looking at does not, then move on. However, what most people do not realize is that a demo account is not something you use until you see your first profits, or even your first week of profits. Demo trading should be something you do for as long as you can, and yes, some people even trade a demo account for months before risking real money.
4. Don’t even think about risking more than 2% on a trade: Yes, we already established that we all want to make millions and risking 2% is not going to get you there, but if you risk more than 2% on one trade, you will most definitely end up kicking yourself.
5. Forex brokers are guilty until proven innocent: OK perhaps a slight exaggeration but the reality is there are a lot of Forex scammers out there. Do your research and find the one that is not and meets your needs. Check that broker inside and out, make sure it got good reviews and recommendations, then and only then can you assume that it is a smart move.
6. You are going to lose money and a lot of it: Yes, I know that sounds harsh but so is the nature of Forex trading. If you are hoping to make money and never lose, you are kidding yourself. Prepare yourself financially, emotionally, and in every other way possible to lose money and a lot of it. The trick is to make more than you lose.
7. You need to turn yourself into a brick wall: A brick wall has no emotions, and that is what you need to be when trading Forex. Not some emotion, not even a little, NO emotion. No greed, no stubbornness, no depression, no anxiety, and no overconfidence. If you bring any of those to your trading game, you will be sorry, mark my words.
8. Do not ride the wave of success for too long: It is easy and tempting to keep a trade open when it is going in your direction but how do I put this lightly? Don’t do it! Set up Take Profits and when you are up, quit while you’re ahead. Don’t get stingy; it will quickly become your downfall.
9. The market will be here tomorrow: If you are not feeling it or if you don’t see your trade calling out to you, walk away. The market will be here tomorrow, and you will be happy you didn’t jump in when the waters were not ready for you.
10. Forex might not be for you: There, I said it. Yes, this is a Forex site and yes, we believe in the market as a fantastic opportunity for retail traders, but that does not change the fact that it is not for everyone. If you are not prepared to accept everything the above nine bullets mentioned, you might find that a nine to five job works better for you.