How to NOT loose money on Forex Trading
You've probably read up a lot about how to make money with Forex or Online Currency Trading. But the truth is, one of the primary things to understand about Forex Trading, is that it's more important to learn how NOT lose money first, before one starts to think about making money.
This is especially tough, because ALL traders, at some point of time or the other, lose money, and lose it big. However, some traders keep losing it – and that is what this article is about. The small mistakes, or misconceptions rather, that result in big losses.
Forex Online Currency Trading Myth#1: I can trade with $100 in a mini account.
The only person for whom this idea worked was the one who had it on the website. They are the ones laughing all the way to the bank, with your, and about a hundred other people's $100. This misconception arises from a flawed understanding of the concept of leverage.
When your currency brokers are leveraging you 500:1, it means that you're going to be losing almost 500 times of what you can actually afford to lose. It also means your margin call is going to come that much faster, since the money you've put up is that much lesser. A bare minimum of $1000 in a micro account is absolutely essential, for starters.
Forex Online Currency Trading Myth#2: I worked my demo account for a week, I know what to do now.
No, you don't. The idea of trading with a demo account is to learn HOW to make a profit, without actually getting any money involved. Regardless of how long you've been demo trading, if you haven't managed to make a profit, it's no use. After all, if you weren't able to make a profit on a demo, how do you expect to do it with real money? As a benchmark, ideally you should be trading profitably with 3 months demo practice. If you're not, then you should look at other options.
Forex Online Currency Trading Myth#3: Forex Trading is best way to help me make extra bucks to pay the bills
Sure, after you've paid off the loan sharks first. Forex Trading is a great way to make money, but if you're already having trouble keeping up with the bills, it's not for you. Successful traders with Forex come prepared to lose a few thousands in the forex market. In your case if it means not being able to make rent, then ensure you have your liabilities covered before you venture into forex trading.