Making money by trading forex is not as easy as it may seems. This is a misconception that occurs due to a lot of hype by forex scammers. No, you have to know the rule first and trade accordingly to gain profits. Otherwise, you’ll get eaten alive. Forex market is very volatile and if you are not careful enough, it can finish your capital with just one big move, therefore it is very important to have strong knowledge to protect your money first.
As it can make you bankrupt overnight, the forex market is also capable of providing you with incredible amount of profits over a single trade. Of course, this can’t be happen without proper experience and skills, but that also what attracted thousands of trader-wannabe to test their luck in currency trading. Don’t wind up losing your entire money like 90% of them; ensure that you know these before you place your money at stake:
It’s not impossible to manipulate the market
The daily trade in the currency trading market is three trillion US Dollars. With this kind of huge number, it might seem impossible for any speculator to affect the market. Yet, large banks with a lot of resources have invested a lot of time and efforts to control the market. Occasionally, even government will step in with numerous new policies.
So, do not get too fixed with technical analysis. Pay attention to news and rumors as well. At times, you know that something big is going to take place and it might be good to halt your trading routines for a while to avoid big loss.
Foolproof trading system don’t exist in forex trading
You can study diverse trading systems and strategies to make earnings in the forex market. A number of them might provide you with excellent rewards while the others don’t. Nevertheless, you must remember that there is no "100% foolproof" system. You WILL have loss trades and when that takes place, ensure that you already well prepared for it by applying proper risk management and money management.
Money management
The leverage system is a big development in currency trading which allows regular people to participate in the biggest financial market in the world. Even so, it’s also a double edged sword. Using "borrowed margin" increases the risk of a margin call and may even result in a closed account.
For that reason, you must know your number before making any trading decision. Do not put all your cash at stake. Make a simple calculation before you place a trade. What if the market moves in the wrong way? Can your equity hold it? Regardless of how sure you are of your analysis, don’t force yourself to buy more lots than you can handle.
Applying risk management
Letting a position floating without limits is usually a bad idea. In this case, always place your stop-loss and take-profit order right after you opened a position. At times, you may see a great opportunity and want to grab as much profit as you can. In cases like this, use trailing-stop as an alternative.
Trading forex is not similar to gambling. In the world of forex trading, there are certain knowledge and skills that you must know to protect your fund against huge loss and increase your winning probabilities. If you are too lazy to learn this skills, it is better to look for other places to invest your money. To put it simply, here’s the two basic rule to keep in mind before you start trading forex: understand the basic mechanism first and only trade with money that you are afford to lose.