Forex trading – it’s one of the most exciting new ‘games’ in town. The stakes are variable enough that almost anyone can play, and the potential winnings are high enough to tempt even the most conservative into the running. There’s something romantic and dashing about trading in money – a cachet that stock, bonds and mutual funds just don’t have. With trillions of dollars changing hands everyday, it seems like everyone’s got a fail-safe method that will make you rich overnight. Here are nine failsafe facts that will guarantee that you fail in forex trading.
There is a failsafe method to make money on every trade.
Just like there’s no such thing as a free lunch, there’s no such thing as a failsafe method. You WILL lose money on some trades, it’s inevitable. Expecting to always win is a guarantee that you will hang on to trades long past the point that an experienced trader would have found an out.
You don’t need to know anything about the market to make money in it.
Not knowing your playing field is a sure way to hit every bump and hole in it. It’s not enough to read a few articles from your dealer. You need to make a concentrated effort to understand the forces that drive the market so you’ll know the best times to make a move.
You can play a winning game by making frequent trades with small profits.
If your goal is to make a few hundred dollars a day, you may be ahead of the game, but you’re seriously limiting your profit potential. The only people getting rich on frequent tiny trades are the dealers taking commission on them.
You don’t need a plan to make money in the currency market – making money IS a plan.
Trading without a well-thought out plan is like jumping out of a plane without a backup chute. Your plan is what keeps your eye focused on your goal, and gets you through the inevitable losses. Currency trading isn’t a short-term game, but most new traders (95%) quit within the first year because they didn’t have a plan to follow.
If you stick with a losing trade long enough, it will turn around.
Sticking with a losing trade is a good way to lose more money. When a deal isn’t going the way that you expected, it’s hard to admit that you were wrong and get out – but it’s the best way to avoid losing even bigger money. Winning on one trade isn’t going to make you rich overnight. Consistently knowing when to get out – whether it’s to cut your losses or grab your winnings – is the way to be a successful currency trader.
Where there’s smoke, there’s fire.
Rumors are just that – rumors – 99% of the time. If you want to win at the game, base your trades on reality, not hearsay. On the other hand, rumors can alert you to look at what’s really happening and make a decision based on the movement that you see.
The more currencies you trade, the better your chances are of scoring a big profit.
The more you know about a currency, the easier it is to predict how and when it will move. The more intimately you understand the way it behaves, the better your chances are of consistently making successful trades in that currency. If you’re trying to focus on too many different currencies, you’ll be spreading yourself too thin to really get to know any one of them.
Thinking long-term and trading short-term is a sure way to make money in the long run.
That’s one of those logical fallacies that sound good on the surface. Look at it more closely though. If you’re trading in the short term, then you need to keep your eyes on the short term rather than trading to what you think the market will be in a week. Today is today – if you make your best trade today every day, you’ll consistently be ahead of the game.
The way to make money in forex is to always have a trade in motion.
Sometimes there just isn’t a trade that’s going to profit you. Making a trade just to make a trade is a sure way to do yourself no good – and possibly a great deal of harm.
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