Based on YouTube and social media ads, foreign exchange trading seems like a great idea. People make it seem like once you’ve done a bit of Forex reading and practice, you can just throw yourself into trading and start making good money.
These ads are misleading.
Forex trading certainly isn’t a sure thing. While resources like TradingOnlineGuide will prepare you well to trade Forex, you should be cautious. Here, we break down why you need to be careful and what you can do to give yourself the best chance when trading Forex.
What Are The Risks?
The market and exchanges are beyond your control, so any trade can easily go against you. The chance to profit also means the chance to lose. You may conduct sound analysis into a certain trade you are making, but that doesn’t guarantee success.
One factor can cause exchange rates to go in either direction, or unforeseen events may cause mass selling or buying of the currency you just traded. However hard it may be to analyze a trade, a sudden event or piece of information you don’t know about can scupper everything.
The other main risk is you. Traders make mistakes all the time, but they are much more exaggerated for beginners, who lack experience trading in real time and may overreact.
Many people have the impression that Forex is a straightforward way to make money — it is anything but that. This leads many beginners to go all in at first, mounting losses quickly. They don’t do their homework, they risk more than they can afford, and they don’t trade with a plan.
The markets and the traders can be volatile, so it is important to be prepared. Give yourself the best chance of success and know what you’re getting yourself into.
How To Give Yourself The Best Chance
Don’t go in blind. Trading is complex; you can’t learn by trial and error. There are a lot of moving parts and you need to understand how markets, exchanges rates, and risk work if you are going to succeed Forex trading.
The first thing you should do before trading is getting your head in a few books, reading some trading guides, and watching some videos.
Choose A Platform With A Simulator
After you’ve studied, the actual trading can be a little daunting. Study prepares you theoretically but doesn’t compare to the actual experience. The only way to prepare for the pressure of trading is to practice.
When choosing your trading platform, make sure to find one that provides simulation. These enable you to practice trading — often with real-world data — in similar conditions but without risking your own money. This will help you prepare properly for trading, as you will learn to do it in real time in realistic conditions.
Cut Losses Early, Let Gains Run
Many traders make this very common mistake — particularly beginners. They let losses run longer than they should, thinking that they may turn around. And conversely, traders will cut winnings short, too, fearing that success could turn to losses.
In reality, neither of these scenarios are likely — if you are making a loss on something, why does that suggest your fortunes might turn? By hoping against hope, all this does is minimize your winnings and risk extending your losses.
If you want to maximize your chances making money on Forex, be prepared to fail first. Give yourself time to study and practice. When you’re ready, make your gains run as long as possible and cut your losses quickly before they mount.