Forex for Beginners: 2 Important Reminders all Traders Must Know

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There are numerous things that would’ve enticed you to join the field of forex trading, one of them being the offer of great income. But that’s not all forex trading is made up of.

Here are the most important things you must remember when entering the field of forex trading.

Forex Trading Concept

#1: Leverage can cause you to lose money despite having a winning strategy
There’s always a chance for excessive leverage to result in the loss of capital despite having an otherwise profitable strategy. The best way to understand this is through an example.

For instance, let’s say I’m flipping a coin and the conditions were this: if the heads land, you stand to earn $2, but if the tails land, you then lose $1. Now my question is this: would you flip that coin?

Most people would say yes and I’m guessing that you would too, maybe even consider flipping the coin over and over. Having a 50/50 chance between gaining $2 and losing $1 is an opportunity that you would most definitely accept.

Now let’s say that I still have the same coin but the stakes are different. This time: if the heads land, you will triple your net worth, but if the tails land, you will lose every single possession you have. Same question as before: would you flip that coin?

I’m guessing you wouldn’t be too keen on trying out the coin that can cause you to lose everything you own. Despite having the same percentage, the same coin, the stakes are different and more extreme, just one wrong flip and it can ruin your life.

Going “all-in” on one or two unlucky trades can result to you losing everything. This is one of the ways that leverage can cause even a winning strategy to lose money.

#2: Forex is not a “get rich quick” opportunity
Always keep in mind the saying “It takes money to make money.” Contrary to popular belief, forex trading is not going to turn your $10,000 account to $1 million overnight. Your strategy does play a huge role in determining the amount of money you earn, but it’s not the only factor you should consider. One of the important factors includes the amount of money you’re actually risking.

But this doesn’t mean the forex trading is no longer worth your time. There are numerous successful Forex traders in the field who trade for a living. The main difference is that their success was achieved and developed over time; they were also able to increase their accounts to a level that can create sustainable income.

Conclusion
Before signing up with any broker makes sure that you know enough and that you won’t be easily manipulated, not all brokers out there will prioritize your well-being.

Forex trading comes with the full package, meaning the good and the bad. There are potential for great gains but there are also the risks that you must familiarize yourself with. Just don’t forget to research and learn as much as you can about the trading field and the forex market before making any final decision.

Forex trading is not just a part-time job or a hobby; it can also be your main source of income with the right combination of strategy and experience. Moreover, having the right broker can help you go a long way, so make sure to choose wisely.

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5 comments:

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