Things To Be Aware Of When Trading In Foreign Currency Exchange
Markets
Like all good news, when a trader makes a lot of money from a foreign currency
exchange, you’ll hear about it shortly afterwards. What you don’t hear so often is
the horror stories of FOREX investors who have lost their life’s savings on a bad
trade. In most cases, individual foreign exchange traders who lose lots of money
have done so either because they were greedy or because they forgot some of
the cardinal rules about trading in FOREX. To try and make sure this doesn’t
happen to you – here are some of the things you should be aware of before you
execute your first trade:
1. System
Before you even consider making your first FOREX trade you need to make sure
that you have a tried and tested system in place. Here you can either chose to
adopt a fundamental analyst approach, a technical analyst approach, or even a
hybrid of both. However you decide to proceed, one thing is for certain – you
need to make sure you understand these concepts before you start trading.
2. Practice, practice, practice
With so many different ways to learn the fundamentals of how to make money
from FOREX trading available to you, there is absolutely no reason why you
need to be rushing in and using your own money in a FOREX trade before you
have a basic understanding of how the system works. Whatever else you do,
you must take the time to learn to walk before you run by practicing and trying
your different chosen trading systems on simulated FOREX programs.
3. Educate yourself and stay educated
One of the main reasons why FOREX traders make a loss is because they have
not educated themselves about the currency they are trading in. If you have no
idea what the current retail index price is in the United Kingdom, then there is an
above average chance you should not be trading in pounds sterling! The simple
fact is, if you want to trade in a currency then you need to make sure you know
as much about that currency as you possibly can. Moreover, to stand any
chance whatsoever of making any money over the long-term period, you need to
keep checking what is going on in that economy. As such, you not only need to
educate yourself, but you also need to make sure you stay educated!
4. Know when to get out
Some traders have a sort of gamblers’ complex. If they are on an upturn they
tend to want to hang on to see if the market will still go up. If all your indicators
are telling you now is the time to sell, then no matter what your gut feeling is
telling you, you best sell if you want to maximise your profits. Likewise, don’t
hold on to a losing position in the hope that there may be a reversal. It could
take years for a currency to return to the position it had last week – if at all!
Better to cut your losses and run now than it is to keep hold of something no one
else wants.
5. 24-hours a day
Remember that the foreign currency exchange market is open 24-hours a day, 7-
days a week, 365 days a year, so movements can and do change very quickly.
As such, you should be keeping a careful eye on your investments 24-hours a
day, 7-days a week, 365 days a year.
