5 REASONS YOU SHOULDN’T TRADE FOREX
5 REASONS YOU SHOULDN’T TRADE FOREX
#1 You have no extra money
Using leverage and margin can help those with little initial capital
Because the market can be volatile, there is always the risk of losing money when trading a currency pair.
Losing trades over a long period of time means that your account balance can quickly fall to zero.
In addition to the inherent risk linked to trading, with Forex trading you need to add margin trading and leverage, which means that you can invest large amounts with little initial capital.
So, this high level of risk means that you need to be sure that you do not use money that you need to live on – always trade with money you can afford to lose!
#2 You don’t know what you’re doing
Before even considering trading, you need to know the basics of the markets, what influences them, and how trading works.
… you need to have a trading strategy that suits your trading style
Another important aspect is that you need to have a trading strategy that suits your trading style, with strict money management and risk management rules that govern how you allocate your funds to trades.
If you have no trading experience, and you do not know how markets work and relate to each other, Forex trading might not be the right investment option for you – at least not yet.
#3 You can’t handle when you’re wrong, or when you’re losing
When making trading decisions, you can be right and make money, but there is also a high probability that you’ll be wrong and lose money.
Trading with a strategy will avoid you losing your cool
That’s fine – as long as your profits are higher than your losses. Losing trades are part of the trading game – you need to be prepared for this and not take it personally!
In Forex trading, you need to quickly recognise when you’re wrong, and close losing trades as early as possible. It’s important to develop your ability to accept your losses and learn from your trading experience.
But do remember, it’s ok to be wrong – you can’t be right 100% of the time in every single trade you execute. And if you can’t handle losing, you won’t be able to be profitable in the long run.
#4 You’re risk-averse
With good money management you don’t have to fear the markets
Fast changing market conditions, high volatility, and leverage can make Forex trading a high risk activity.
You can make huge returns in the FX market, but these kinds of returns do not come without risks, especially when using leverage.
So, if you can’t handle the idea of losing every dollar in your account, Forex trading is not going to fit your targeted risk/reward.
#5 You don’t have time
winning forex traders can be full time.
There are several trading strategies you can use when trading currencies, each requiring a certain amount of time in front of the markets.
For example, you can use a trend following method, or position trading strategy, which will require less time than short term trades, like scalping or day trading.
Keep in mind that learning about trading, the Forex market and how to develop the right trading plan takes time. You’d better be sure you have time to dedicate to this activity before starting to invest in currency pairs.
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