Ten Ways To Own The Dollar In FOREX

by Hank Coleman

In the late ’90s, online forex trading first began, making the forex market available to the average consumer. (Forex is short for foreign exchange or currency trading). People flooded into the new type of investment with high expectations and little understanding of what it involved. Unfortunately, that resulted in disappointment and a lot of consumers who doubted whether forex trading had any real value at all. Here are some suggestions that can help you avoid their mistakes and own the dollar using forex.

  1. Stay away from anything you don’t understand. This is the most common and fundamental problem that happens to forex investors. You shouldn’t be trading something or risking money if you don’t know how money gets made in that market. Forex trading is complicated; take the time to understand everything in detail before getting involved.
  2. Invest in a credible course or some other type of forex education. If you plan to start trading forex, you should make another kind of investment first – education in what you’ll be doing. Quality forex education is available in some places for free, however; it will also be worth your money to pay for a good trading course. Avoiding this step to save money makes no sense, because your losses are potentially large multiples of what a good course would cost.
  3. Don’t expect unrealistic returns. Unfortunately, retail brokers are all too willing to convince you that you are missing the next big thing in investments. Often their advertising is quite misleading. This leads many consumers to enter forex expecting easy, instant money. There are great opportunities in forex, but there are also big losses. Enter the market expecting modest returns – you can always do better with time.
  4. Don’t buy anything that is too good to be true. As in every other market, you will find funds, traders, strategies, and brokers with unrealistic promises. One area in forex where this is common is with robots – software that automatically trades for you. These can be helpful in some ways, but don’t expect to make money just by loading something on your computer. Always ask yourself a simple rule of thumb – if this software or trading strategy is so amazingly profitable, why do they need to sell it to me to make money?
  5. Find a forex broker that you can trust. This isn’t necessarily easy. But the best method is to combine personal research with recommendations from experienced traders. In particular, you should be looking for tight spreads and freedom from high commissions or special fees. Naturally, brokers need to make their money too, but the fees you pay should be comparable or lower than other good brokers.
  6. Practice for awhile before putting any money on the line. Most brokers now offer free demo accounts. These allow you to practice trading without actually risking any money. Of course, you don’t make any money either – you are experimenting with the process to see how you would do with the real thing. Take advantage of this opportunity and see how you perform.
  7. Pay attention to current events and economics. The best opportunities in forex arise from displacements in the market that cause fast changes in currency values. All of the economic data that affects a country has a significant influence on the forex market. You will never be successful in forex without a watchful eye on the political and economic scene.
  8. Develop a clear strategy and make yourself follow it. Forex traders fit into various categories with different trading styles or strategies. Once you have gotten a good education in forex, it is worth your time to develop an outline of how you plan to trade or how you will respond to various market conditions. Then force yourself to stick with your strategy. This keeps you from making foolish mistakes based on greed – the next suggestion.
  9. Don’t become greedy. Most big losses happen when beginning traders have a long string of successes. This feels so good, that they put increasing amounts of money on the line and take huge risks – they fall prey to greed. When the market turns, all of their profits are gone and more. This is why it is imperative to know your strategy and discipline yourself to follow it.
  10. Be patient. The typical pattern for retail forex is that customers start trading long before they should and without proper education. Once in, they stay in just long enough to make some mistakes and lose their money before moving on to something else. You want to be the person that breaks that pattern. Expect to lose some money at the beginning, but figure out what you did wrong and learn from your mistakes. Whatever you do, don’t quit right when you are coming through the end of the learning curve.

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{ 1 comment… read it below or add one }

Guava April 6, 2010 at 4:51 am

Your suggestions are really interesting. When ever Dollar down, forex market up and vice-versa.

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