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Expensive Beginner Forex Trader Mistakes - How To Learn Your Lesson And Move On

Nick Makaryk
Jun 17, 2008
As you learn a new skill, mistakes will be made. This is a universal truth. When learning how to trade in the Forex, however, mistakes can be costly and can become expensive. An experienced investor will know how to avoid costly mistakes, but it takes time to be experienced. One way around this is to work with a broker. With teamwork and a little research, you will learn how to navigate round these types of common mistakes when investing in Forex.

One of the most common and costliest mistakes is buying or investing on margin. Margin is when you use borrowed money to invest with. Even though purchasing on margin can help you make more money in the short run, it can make your losses much bigger because you are buying with money you don't have. When the margin is looked at as free money, it is dangerous and because you are dealing with actual currency, the potential for bigger losses on the Forex is much higher. Using the margin will only end up in more debt than profits. Think of it as using a credit card to buy stocks. Also, if the margin is used in the Forex, your investments have to be watched much more closely than if you did not use it. If you don't have time to be watching the real time information every second of your day, do not invest using the margin.

Among new traders, another very common mistake is working on a 'tip.' It is easy to think that another investor knows more than you do. Or that you have stumbled across the next big thing. Or maybe someone is trying to be helpful and lets you in on the inside track. Sometimes it will be beneficial, but, unfortunately, they usually turn out the other way. Most of the time working on unfounded tips leads to bigger losses than profits. If you hear about a tip, do your homework. Check it out; go deeper than just the headlines. If you check with your broker and they give you the green light, it still may not hurt to have a second opinion when dealing with Forex. This is true when trading, buying or selling any type of currency on the Forex.

Not understanding the workings of the foreign exchange is another very costly mistake that newer investors make. The good news is that there are several ways to get educated that are free or low cost. There are tutorials available online and thru investment groups that deal exclusively with Forex trading. This can help you make good decisions when choosing how to buy, sell and trade on Forex. Of course, Internet teachings and investment groups should be used in conjunction with advise from a good broker. A good broker will know everything there is to know about the Forex to help the investor make good choices. It is important to find a broker that is in good standings with large financial institutions and has considerable experience with Forex.

Another mistake 'green' investors make is thinking that just because the price of a certain currency is low, that it is a good time to invest. This is sometimes the case, but not always. There are several factors that contribute to the current exchange rate. The rate may not be favorable for a long time. Be sure to take that into consideration when choosing which currencies you will invest in. There are usually distinct reasons that a currently is not trading at a high price. Researching trends of the given currency will help you find the reason. Also, research will be invaluable when figuring which currencies have higher profit ratios on the Forex.

Under estimating your trading abilities is another mistake that both new and seasoned traders make. Some times, it is fear of taking too big a risk that keeps investors from making a bigger profit. If you are willing to learn, through research and demos, you can be successful while investing in Forex. While it will take time and patience to get 'up to speed' in Forex, there are risks to be taken and profits to be made.
About the Author
Nick Makaryk is an Internet Publisher, Copywriter, and Founder of Best Credit Cards A Free consumer credit card comparison site helps consumers find the Best Credit Card while avoiding high interest rates, charges, and fees.
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