| Many people think that trading forex is an easy way | | | | $10 000 (or some other amount) of hypothetical |
| to millions of dollars because some $19.95 ebook told | | | | money, where you can watch and study their charts |
| them so. Those types of publications talk about the | | | | and make trades with this "money" as if it was your |
| potential winning trades you can make, but few will | | | | own. By far, it is the best way of learning how the |
| even mention the potential losses. | | | | markets move and you can test any trading |
| As an example of a winning trade, let's say the EUR | | | | techniques you come up with. By doing this, you will |
| USD contract is trading at 1.2500. You believe the | | | | learn so much, as it's like learning how to trade using |
| Euro is going to increase in value, so you buy a | | | | someone else's money and there is no risk of a real |
| contract for 100 000 Euros and sell $100 000 USD | | | | loss (or a real profit either) |
| (this will require a deposit of about $1000 of your | | | | Have a large trading account |
| own money). After a few hours, you prediction is | | | | Once you have practised trading forex and gained |
| correct, and the value of the contract goes to | | | | confidence in your trading ability by using an online |
| 1.2510, making 10 pips profit. Because it was a $100 | | | | brokerage's software and hypothetical money, you |
| 000 contract, each pip is worth $10, therefore you | | | | may feel it is time to use your own money. You |
| made a profit of $100 on your $1000 deposit. A 10% | | | | should have as large an account as possible. By large, |
| profit is pretty good for a few hours' work! | | | | I'm not talking about millions of dollars. If your broker |
| However, what do you do if the value of the | | | | requires a deposit of $1000 for each $100 000 of a |
| contract goes to 1.2490? This means that you lose | | | | currency your trade, why not have $10 000 in your |
| $100, or a 10% loss on your $1000 deposit. Uh | | | | account. That way, if you lose 50 pips (ie $500), you |
| oh...how many of these losses can you sustain? On a | | | | have only lost 5% of your total money instead of |
| small account of $1000, not many! Therefore, the | | | | 50% if you only had $1000 in your account. If you |
| key to successful forex trading is that you need to | | | | don't have $10000 to trade, the next tip may help |
| keep your losses to a minimum, as you WILL make | | | | you out. |
| losses eventually. | | | | Choosing a Lower Leverage Level |
| The only way to guarantee never to lose money in | | | | This will be very helpful for those people who may |
| forex trading is to never trade at all. The one thing | | | | have only $1000 (or less) to trade. Most forex |
| that few dodgy forex ebook sellers mention in their | | | | brokers will give you a leverage ratio of 100:1 and the |
| book is that losses can occur, and they WILL occur | | | | standard contract is for $100 000. This means that |
| to everyone. Here are some ways to minimize your | | | | the lots they trade in are $100 000. This means that |
| losses in forex trading. | | | | for every pip (ie 0.0001 increase/decrease in the |
| Have a plan | | | | currency pair), you make/lose $10. However, what |
| Most losing forex traders do not have a trading plan | | | | has become popular today are called "mini contracts", |
| for what to do if they make a losing trade. They | | | | where the broker trades in lots of $10 000. This |
| simply hold on to their losing position in hopes that it | | | | means that for every pip, you only make $1. This is a |
| will come back. Most times, their losses can't be | | | | good place for either inexperienced or |
| sustained by their accounts, and therefore they end | | | | under-capitalised traders to start. Therefore, if you |
| up losing everything. The smart traders that make | | | | only had $1000 in your account and you were trading |
| millions trading forex have a trading plan that tells | | | | a mini account and you lost 50 pips, you have only |
| them what to do if they start making a loss. This | | | | lost $50. Not too bad, but it also means that if you |
| usually means getting out of a trade very quickly if it | | | | made 50 pips, you only made $50. At the end of the |
| is not performing, thus minimizes their losses. These | | | | day, your losses are kept to a minimum and you can |
| good traders have no problems whatsoever | | | | stay in the game longer. |
| admitting they made a losing trade. In fact, they will | | | | Believe it or not, there are even some brokers who |
| probably tell you they make twice as many losing | | | | deal in "micro lots", which means that each pip is only |
| trades as they do with winning trades. So how do | | | | worth $0.10. Your losses will be kept to an even |
| they make money? Simple, one of their winning | | | | smaller level while you are learning, so you can |
| trades may make ten times the amount of one of | | | | approach trading with a clear head and not worrying |
| their losing trades because they kept their losing | | | | about losing your shirt! |
| trades small. Therefore, put your pride away and | | | | The key to successful forex trading isn't about |
| learn to accept a losing trade quickly! | | | | always making winning trades. If you trade forex, |
| Practise makes Perfect | | | | you WILL make losing trades, and anyone (or forex |
| Most online forex brokers will allow you to practise | | | | ebook you bought online) who tells you differently is |
| your trading first. Each broker has slightly different | | | | lying. The key to successful forex trading is simply to |
| procedures for entering and exiting trades based on | | | | minimize your losses. By minimizing your losses, you |
| their software, so it's best to practise first. This | | | | stay in "the game" for longer. |
| means that they can set up a practise account with | | | | |