Trading on the foreign exchange is a tricky beast to tame. With so much money roiling around all the time, there are a lot of mistakes rookie traders make. Here are a few you can avoid right away.
Putting it All in There
Do not practice forex currency trading online with your bottom dollar. Part of the reason that’s a bad idea is that it will make you jumpy. There is always the possibility of loss, and you still need some money just to live on.
Not Putting in Stop-losses
A trailing stop-loss can become your very best friend in a hurry. If there is a margin call, which is when the lenders demand back the money they lent everyone, you could actually be on the hook for the entire amount you’ve been trading. If you’ve been using 100-to-1 margins, that could be a real problem for you.
Not Having a Plan
Remember when we mentioned how putting in all of your money can make you jumpy? That very same fear tends to rear its ugly head when you don’t have a plan and the market turns on you. Since bad markets happen all the time and the future is unpredictable, you always need to have a plan. Know when you’re getting in, why you’re getting in, and when you intend to get out.
Thinking Non-Forex
Often when a newbie investor begins to lose money in a trade, they try to dollar cost average more money into it. These are not mutual funds, and the same type of math does not apply. This will lose money every time.
