Guest post by Ricky Peterson.
Being successful at Forex trading means putting in a lot of work, understanding the game and learning to be disciplined, objective and above all else being in control of your emotions.
The risks in Forex trading are significant but if you know what you’re doing and learn the basics prior to investing any money at all, you stand a better chance of success.
The reason for writing this post is that many people jump into forex thinking that they can make a quick buck, and whilst it is possible to make good money, more people just end up losing it. So the following principals, if you follow them will hopefully help you not to become such a person.
Don’t expect to earn an income from Forex trading
This is perhaps the most important principle of all. It’s more to do with your mindset than anything else. You should enter into the Forex market with surplus cash you hope to invest. Never expect an income as the risk is too great to expect this.
If you can treat it as a game which you pay to play, you will be able to focus on getting good at the game. As with anything this will take time, and it will cost you a few losses first.
Find a system you can work with
Learn as much as you can about Forex and how it works. Furthermore, find a system of trying to gauge which trades to make and when, so you have a blueprint to follow. No blueprint will be guaranteed to work all the time, but you should do your research to find and understand one that gives consistent results.
A common mistake is to spend all of your time looking for the ultimately system (which doesn’t exist by the way), you would be better off just finding a good, simple system and focus your time on learning to use it well and consistently.
Work with play money to start with
The best way to understand how trades work is to use play money. Imagine you buy a certain amount of one currency and then put your system into action. Give yourself a pot of $2,000 to start. See how your trades work out and add or subtract the relevant amount from the pot as you proceed. This will make it easier to make real trades when you have accumulated knowledge and play money.
It is tempting to put in real money right away, especially if your first “pretend” trade goes well – but to make money you need to be able to win consistently; otherwise you are just gambling.
Be prepared to learn over several years
Don’t rush into this market expecting or hoping to make a quick profit. It could happen but it is far more likely to happen over time rather than immediately. Be prepared for the long journey.
Keep Accounts For Your Play Money
As I mentioned above, if you can’t win consistently you are gambling. Stick to play money and keep accurate accounts so that you can see exactly how you are performing.
If you don’t keep accounts it is easy to convince yourself that you are about breaking even when in reality you are losing a little bit here and there, and that can really add up.
The Forex markets are no place for a novice. But the more you learn and the more you understand, the easier it will be to press ahead and become one of the traders who actually do well. There is money to be made here – but it might be more challenging to do than you think.