JAN 14: The Important Ways to Keep From Losing in the Forex Markets

by David Jenyns on January 14, 2007

The idea behind forex trading is of course to make money. However, like any speculative investment, there is a change of loosing money. The same holds true with the stock market and the commodities market, and in business itself. Any investment that has a chance of great gain will also have a certain level of risk. As a forex trader you will want to minimize your chance of risk. Do it in these ways.

Stay informed. Read the news magazines and political events journals. Know what is happening in the world politically.

Have a good understanding of economics. Take a college econ course if you never have. Read the journals of economics and books by economists like John Maynard Keyes, Kenneth Galbraith and Walter Williams.

Read periodicals like the Wall Street Journal and Business Investors Daily.

Open up a practice demo account and use it before you get into the market.

Have a broker you trust.

Cultivate friendships with other traders who know their stuff.

Look at the historical trends. Read and study forex charts.

Take a course in forex trading to get your skills up to snuff.

Research forex on the Internet.

And finally, only invest money that you can actually afford to loose if worse comes to worse. Then you wonít be out of the game completely.

Forex trading is not a game for the timid. Jerry Sparks was a forex trader who did very well for years. He followed all of the rules. His college degree was in history with a minor in political science and he went back and took extra courses in economics and business. Jerry stayed informed. He watched CNN, CNBC, MSNBC and Fox News often. He went to all the major web sites and read several magazines. He also spent time with a demo account before he got into the market in a big way. Jerry was determined to make a killing, and he eventually did. Jerry also only invested money that he had designated as risk capital. He could still live without it if needed.

Sam Franks, Jerryís friend, didnít do as well. Sam never took an economics course in his life and in fact was bored by Economics. He knew nothing of history or politics and didnít even know who John Maynard Keyes was. Sam took his life savings and invested in forex trading without having spent time practicing with a demo account. He knew nothing of the currencies he was trading, and didnít know what historical trends were, or what activity was occurring. He knew nothing of inflation, and in the end he lost some of his money. The difference in these two people is important. One was prepared and the other was not prepared. One made money and the other did not. One did his homework and one neglected it. What you can learn from this is that it is better to be prepared.

By knowing something about other countries and the activities happening over there, youíll be better able to make educated guesses. For instance, if there is a great deal of inflation in a country, you may not want to invest in its currency. However, if you are hedging against that currency you may do well. Remember that it is never too late to learn. There are many good courses available online, and offline.

There are many great books to read. Many economists write newspaper and magazine columns and many have web sites you can go to. By doing so youíll be able to learn at the feet of the masters. See how their minds work, and what currencies they are currently investing in, and youíll be in a better place when it comes time to make those hard decisions yourself. Also going online and meeting other people in forums and chat rooms who share your interest will give you more insight and knowledge. Like anything else in life, forex trading is a job that you must prepare for. The better educated you are, and the better prepared you are, the more likely you will be to be successful.

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