Blunders That Inexperienced Forex Traders Commit

3 Jan
Blunders That Inexperienced Forex Traders Commit
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Trading in the Forex or foreign exchange market can be an exciting way to earn additional income. However, if you’re not cautious, it can also lead to huge monetary losses. In order to avoid such scenario, here are a few of the common mistakes that people make when trading in the currency market. Thinking it can make you rich quickly Many people assume that trading in the Forex market can make them rich sooner than other investment vehicles and thus open an account without considering the risks and effort that must be dedicated to realize such. If you’re thinking about Forex trading, you should think of it as an additional career which takes some time to master. Aside from researching about your preferred currency pair, you also have to learn fundamental and technical analysis principles; come up with a proper trading and money management plan; and develop, test, and fine-tune trading methods before you can experience steady but not always considerable earnings. You also need to monitor your positions and stay abreast with market movements. Trading emotionally Traders ought to know when to keep a position open and when to close it. Determining these in advance will stop you from deciding randomly and trading emotionally. Two powerful emotions that people trading in the currency market have to deal with are fear and greed. Fear will prevent you from making a trade when there is a favorable opportunity and it can also lead you to close a position before it has the chance to become lucrative. Greed can push you to make risky trades in an effort to gain a lot of money, which in many instances, turns to considerable losses. Placing stop orders will let you secure profits and manage your risks effectively. Trying to recoup your losses aggressively can also backfire and lead to losing a lot of money. Don’t have a money management plan in place What sets experienced traders from novices is that the former knows how to manage their money. For instance, they rarely risk more than one percent of their total capital on one trading session. By doing this, you are assured that your account won’t be eroded substantially in a single day. Using too much leverage In Forex, trading at a margin is not only possible, it is encouraged. Then again, leverage can cut both ways, that is, it can increase your earning potential but can also wipe out a big chunk or all of your initial investment.. Finding True ECN brokers is difficult but ECN is the way of the future for forex. If you want to, you may look at IC Markets .
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