Currency Trading Guide - Four Aspects that Can Save You from Huge Loss

In the world of forex trading, you can’t just come, throw your money, and expect it to grow significantly. The truth is you need to have some knowledge on how the system works first before you actually can gain any profit. Rush carelessly and your days as a trader is numbered. The forex volatile market is really capable to suck your money dry overnight and I’ve seen that happen countless time, thus you need to prepare yourself well.

As it can cause you to bankrupt overnight, the forex market is also capable of providing you with tremendous amount of profits over a single trade. Naturally, this can’t be happen without appropriate experience and skills, but that also what drawn countless trader-wannabe to try their luck in forex trading. Don’t wind up losing your entire money like 90% of them; make sure you know these before you place your cash on the line:

There are people and organizations that are capable of manipulating this huge market

The regular trade in the currency trading market is 3 trillion US Dollars. With such huge number, it may seem impossible for any speculator to affect the market. Nevertheless, large banks with a great deal of resources have spent a lot of time and efforts to manipulate the market. At times, even government will step in with various new policies.

So, do not get too fixed with technical analysis. Take note of news and rumors as well. At times, you will know that something big is going to happen and it may be good to stop your trading activities for a while to prevent big loss.

There is no “Holy Grail”

You can learn numerous trading systems and strategies to make earnings in the forex market. Some of them might provide you with fantastic rewards while the others don’t. Nonetheless, you have to remember that there is no “100% foolproof” system. You WILL have loss trades and when that happens, make sure you already well prepared for it by implementing good risk management and money management.

About money management

The leverage system is a huge development in currency trading which allows regular people to take part in the biggest financial market on earth. On the other hand, it's also a double edged sword. Using “borrowed margin” raises the risk of a margin call and may even result in a closed account.

For that reason, you must know your number before making any trading decision. Don't put all your cash at stake. Make a simple calculation before you enter a trade. What if the market moves in the wrong way? Can your equity hold it? Regardless of how sure you are of your analysis, don’t force yourself to buy more lots than you can handle.

Risk management

Letting a position floating without limits is generally a bad idea. In this case, always put your stop-loss and take-profit order right after you opened a position. From time to time, you may see an excellent opportunity and wish to seize as much profit as you can. In this case, use trailing-stop instead.

Do not ever relying on luck or hunch to place a trade. In the world of forex trading, there are certain knowledge and skills that you must know to protect your fund against huge loss and increase your winning probabilities. If you don’t master (or too lazy to learn) these skills, you will end up broke. To put it simply, here's the two basic rule to keep in mind before you start trading forex: understand the basic mechanism first and only trade with money that you are afford to lose.