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How To Keep From Losing When Trading In The Forex Markets

Aug 17, 2007
Just as with any investment, the entire goal of investing in the foreign currency exchange market is to make a profit. The thing you must always remember though, is that just like with any other market investment, you can also lose. The reason that savings accounts and insurance policies pay such low rates of interest is because of the lack of risk. Conversely, the investments with the greatest potential of gain are also coupled with the greatest risk. There are ways of minimizing your risk when you are trading in the Forex markets; I have listed a few below.

First off, probably more than any other market, trading in foreign currency fluctuates constantly and it is crucial to stay informed of current news and political changes. Most Forex traders have a 24-hour cable news channel on constantly as well as multiple news agencies delivering news to their computers.

Another area that will help you immensely is having a good grasp on economics. If you never took a class in high school or college you should consider doing so. Subscribe to journals and buy books authored by top economists like Walter Williams and John Maynard Keyes. You should also subscribe to periodicals such as the Business Investors Daily and the Wall Street Journal.

Take advantage of the availability of a demo account, which will allow you to practice trading before you use real money. I cannot emphasize this enough. If the broker you are considering doesn't offer a demo account, find one that does.

Do your due diligence and investigate the broker you are intending to open a Forex trading account with. It is essential to be able to trust the people you are dealing with and make sure they are trustworthy.

Another great way to learn the business, as well as get great tips, is to forge friendships and alliances with other Forex traders who have a lot of experience. This should be a no brainer but you would be amazed at the number of people who try to play "Lone Ranger".

Be a good student of the industry and read everything you can find about the foreign exchange market and study the charts and historical trends.

There are also some good courses available on Forex Trading. I recommend taking one, especially if you are a new investor. A good Forex trading course can save you a ton of money by educating and teaching you what you should do as well as what not to do. Don't make the mistake of thinking you can just wing it. This is a serious business.

As I tell people all the time, only invest money that you can afford to lose, just as if you were placing a bet. This is the cause of most people's heartache, since they only think of the potential for big gains and forget about the potential for big losses.
About the Author
Gregg Hall is an author living in Navarre Beach, Florida. Find more about this as well as FX trading information at http://www.FXTradingStrategies.com
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