It might seem like a simple principle, but a lot of Foreign Exchange traders attempt to trade in areas of which they have no understanding. You should avoid this by only sticking with what you know. Trade what you understand and pretend the rest of the market doesn’t even exist. Once you begin to profit, then you can think about expansion, but not before.Prior to picking a currency pair, it is fundamental to do some research on currency pairs. Then pick one to trade. If you are using up all of your time to try to learn all the different currency pairings that exist, you won’t have enough time to trade. Pick your pair, read about them, understand their volatility vs. news and forecasting and keep it simple. Always keep up on forecasts on currency pairs you plane to trade.
To be successful in foreign exchange trading, do not fight against the market, but instead recognize your own failures and work to completely eliminate or at the very least accommodate them. Most importantly, do not fall into the trap of believing that you somehow know all the secrets of foreign exchange marketing.
To keep yourself from a margin call on the Foreign Exchange market, never put more than 1% to 2% of your account on a single trade. Manage your position so that if the price goes against you, you won’t lose more than that amount. This will help keep your losses to a minimum.
Don’t get too comfortable with just one or two trading pairs in the forex market. A lot of people make the mistake of learning everything about one pair and sticking with it because they believe they will be able to predict the future. You can’t predict the future of a currency, so make sure you keep yourself working on multiple pairs.
If you are an experienced stock trader looking to start trading in foreign exchange markets, learn the differences. For example, it is often good strategy to “buy and hold” stocks but the opposite is true with foreign exchange trading. Avoid losing money by using stock trading practices by learning about how forex is different than the stock market.
As explained in these tips, foreign exchange is not a miraculously easy way to make money. If you are motivated and can afford to spend a lot of time on foreign exchange, you should start working hard on your training. You will be rewarded for your time and efforts once you become a skilled trader.