There are two ways to learn how to trade currencies: The cheap way and the expensive way. If you’re new to forex, let me recommend that you seriously consider the former and let the latter go until you’ve got at least the basics figured out.
Obviously, the expensive way to learn how to trade the forex is to open an account with a broker, deposit several thousand dollars, and then go wading into the market with no idea what you’re doing. If you have more money then sense, then you might enjoy the ride.
The cheap way to learn how to trade forex is by not using real money. You are going to be amazed at how many bad trades you make when you’re first getting your feet wet. Those bad trades will wipe out your cash before you even know what happened.
It’s not just picking the wrong currency pairs that will trip you up in the beginning; it’s also your susceptibility to making the same common trading mistakes that so many new traders make including:
- Going too deep into your margin account
- Not having a trading system that works
- Trading based upon fear and greed
- Reacting to unfounded rumours and scare tactics
- Failing to analyse market-related news and world events
- Buying or selling into trends that have run their course
- Misunderstanding trading basics such as limit and market orders
- Failing to account for commissions when managing money
- Failing to account for slippage when the market is moving quickly
- Not accounting for the possibility of blowing stop-loss settings in a fast market
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