The Perils of Over-Reacting

June 25, 2009 by admin  
Filed under Forex Tips

Trading on the Forex market is something that can be quite thrilling, such is the potential for making real money. For many people, the thing that attracts them about the Forex market is exactly the same thing that can turn them off it – that is to say the high stakes which exist. Successful trading can make you very rich very quickly, but a bad trade can wipe your profit out in the blink of an eye. Having a negative experience early on can cause a trader to decide not to return to the trading arena. Even the fear of something going wrong can put the brakes on a promising trading career.

It is completely human to be cautious early on in your trading career, in fact, being over-cautious is better than being reckless, because as beneficial as a daring strategy can be, if you suffer a major loss early on in your trading career it can put the thought of failure in your mind on every future trade. You will, in all likelihood, lose leverage from your broker, and you may also become prone to a kind of paralysis which prevents you from trading at all. However, this does not mean that you should react hastily to any drop in the market because every market undergoes corrections from time to time. A short drop is not always the precursor to a crash, and judging the right time to stop your loss is something you will learn to do with experience.

Things to keep in mind for Forex traders

June 25, 2009 by admin  
Filed under Forex Tips

There is plenty of risk involved in trading on just about any market. Hostile conditions can leave you high and dry if you do not have the knowledge required to get out of a risky position at the right time. On the other hand, over-reaction to a temporary situation can put you in an equally tough situation, so it is worth keeping some things in mind

  • Firstly, remember that you are trading with borrowed money. Before you make your first real trades, open a demo account and use that to test your instincts. Once you are making profits consistently you can switch to trading real money – and will be much less likely to lose it. If you have encouraging early results, do not be tempted to jump right in – this is not the time for high risks.
  • Be consistent. It is easy to get carried away if you feel that a position is destined to bring you a profit. You may think inwardly that you have a stop-loss point of no return, but when the currency hits that price you flinch and convince yourself that it is coming back up. You might as well not have set the limit in the first place, then. Have realistic targets and stick to them.
  • Choose your broker wisely. There are some Forex brokers who use legally or morally questionable tactics to guarantee a profit and there is no-one they will not sell out – yourself included. Ask around for tips, and follow the advice that keeps coming up.

Learn to play the market by playing a game

June 25, 2009 by admin  
Filed under Forex for Beginners

Forex is a complicated system which still often confounds people with years of trading experience. Knowing how a situation usually resolves itself does not mean that you will be able to correctly predict how it will resolve itself every time. The market data is an excellent way of judging what the situation is at any given time. It is also as good a way as you will find of predicting future market behavior. Nonetheless, it is not a guaranteed predictor and consequently even the most experienced traders sometimes make a mess of things.

The less experience you have – in anything – the more likely you are to have the wrong reaction to a given situation. If this is in a golf match, then all that rests on your mistake is a little personal pride. On the Forex market, it can end up costing you real money. It is therefore massively important that you have as much knowledge to back up your every decision as you possibly can. One way of accruing knowledge without making costly mistakes and potentially bankrupting yourself is to start by playing online Forex games. These are a kind of simulator which closely reflects the real-life market and tells you how good your instincts are – without ruining you if you make a mistake.

There are Forex games available on the Internet which run entirely free of charge. There is obviously some variation in quality, and you should ensure that you check out more than a couple before committing to one. The more experience you gather before playing for real, the better your chances of making real money in the future.