Avoiding Failure in the Forex Market

It is true that identifiable trading patterns in the forex currency trading have thrown open lucrative investment avenues for well disciplined forex traders.

For novice forex traders who are starting afresh in the forex trading the first dilemma starts with how to avoid failures in the forex markets?

Let me make an attempt to guide you through avoiding failures in the forex markets.

1. Don’t Misuse Low margin and high leverage facility

Never try to over leverage than your capacity. First of all determine the spare cash that you can afford to loose. You may call it as risk capital. You should never risk your life long savings that you can not afford to loose. Even though the high leverage facility is an important advantage but there are dark sides that need not be explained. Forex trading on borrowed money is the worst mistake that small time forex traders and investors make.

2. Never Jump on the Bandwagon without Proper Forex Trading Training

If you are entering the forex markets without any forex trading training then please don’t do it. Even if you have gathered sufficient knowledge on how the forex currency trading markets work, make it a point that forex trading education is a continuing process.

3. Do Your Own Fundamental Research and Technical Analysis

You should be aware about day to day fundamental factors that contribute to the ups and downs in the forex currency rates. Remain updated on economic calendars and various data releases on inflation, GDP, CPI, trade balances, other monetary policy matters and geopolitical events. Technical analysis of the price and volume charts is the best tool to spot identifiable forex trading patterns. Most of the forex traders rely on exact entry and exit points based on the break outs, supports and resistances levels for a potential profitable trade. Don’t stick to only technical analysis. Be flexible and use a right blend of fundamental and technical analysis.

4. Don’t Bank On Future Predictions

Nobody can predict futures. You should always distrust anybody who claims to do so especially those who promise fat returns every day. In forex trading there is nothing like fast buck or get rich quick scheme. You may rely on forex indicators, trading signals and experienced professional’s advice but only after understanding the risk reward ratio.

5. Never Follow a Gambler’s Fallacy

You must be clear in your mind that forex trading is not a game of luck like gambling. If you try to follow a gambler’s psychology, initially you may succeed with few winning trades but ultimately you may fail miserably.

6. Don’t Fall Prey to Your Emotions

You must educate yourself on how to control your emotions. Determine your profit targets from a particular trade well in advance. Take the profits as fast as possible without stretching it beyond your targets. You must have conviction on your analysis but at the same time never get trapped in a loosing position because of sentiments like how can my analysis go wrong? Develop and maintain a disciplined trading style based on your temperament, family obligations and personality.

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