The Biggest Mistake New Forex Traders Make
Forex trading can be very rewarding, both in terms of money and the experience itself. However, it is also one of the most risky and difficult methods. I would certainly not recommend it for just anyone, but if it’s right for you then you could do extremely well.
Because there is only so much money in the world, a trader can only win as much as another trader loses. This is known as a zero-sum game, because every gain matches a loss. However, after the brokers have taken their cut, the winning trader will have made LESS then the other trader has lost. This makes it a negative sum game, and means the vast majority of people who attempt to trade, end up going broke.
So try and get out when you’re winning. It’s very tempting, if you take just a little drop in an otherwise upward streak, to hold on and hope it gets better. But you never know when your luck will change, and telling a minor blip from a huge drop takes a lot of knowledge and experience.
The most important thing to be aware of, and the mistake that the most people make, is not being prepared enough when they start trading. You might not know anything about forex, or maybe you’ve read a book or two, or even taken a course, but nothing can really prepare you for the experience itself.
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Maybe you think paper trading will prepare you, and it certainly will teach you a lot, but not enough to succeed. As I’m sure you know from other experience, doing the real thing is never quite like a simulation, no matter how close. Just the fact that you are using real money completely changes the nature of the game.
The price of learning by experience is extremely high, because of the huge amount of money involved, which enlarge any mistakes. At the start of your career, you need some expert guidance to have a chance of success, and for that the best you can get is an experienced mentor. Failing that, there are computer programs available now that can do almost as well. Granted, they can’t talk to you face to face or give you advice about anything besides trading, but if your just starting out a good system can dramatically increase your chances of success. Forex trading involves huge amounts of money, and anything that gives you a better chance of holding onto that money, or even increasing it, is a must-have for a new investor. Or even for an old one, in fact, as a second opinion can be a big help.
There is a lot you can read about in books – heck, you’re reading some of it here. But these words are only the tip of the iceberg, and there is no way to convey, in an impersonal book or article, what the best thing is for you to do. So if you want to do well with forex trading, then you need a good system to work with, and someone who can offer you good advice when you need it.
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