What are the risk of trading currency with Forex trading?
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What are the risk of trading currency with Forex trading? I live in China, but wants to try trading currency with Forex. One of the operator asked me to send the money across to them in USA and start trading in minutes time. I don’t know much about currency trading but they said they will offer me a course to get me started. Do I engage in this business?
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3 Responses to “What are the risk of trading currency with Forex trading?”
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September 8th, 2010 at 4:54 pm
Like everyone else has said you need to take your time when deciding to trade the Forex market. That being said, if you are willing to learn how to trade it properly and are patient you can make money even with a small ($500) account.
You will need to set strict money management rules, that is how much to place on each trade, how much you are willing to lose on each trade and how much profit you are happy to take on each trade.
If you want to make money with forex, check out this site
http://make-money-with-forex.org
Here, You’ll find the best forex software that can help to increase your trading profit.
September 8th, 2010 at 4:54 pm
I am a currency trader and let me tell you it takes a certain mindset to be a good trader. Currency trading is a high risk high reward form of trading. The reason being is that currency trading is often done with high leverage, for example, 100:1 meaning every 1 dollar of yours controls 100 dollars of currency.
To be a successful trader you must not only understand the concept of risk management but practice it as well.
I myself went through a training program from Market Traders Institute which was very well laid out and comprehensive. However, If you spend the time much of the basics of currency trading can be learned from various free blogs and sites.
http://www.forex4noobs.com/ contains a lot of information and free ebooks on his method.
you should be careful when selecting a program of learning as most brokers offer very very basic instruction and should not be considered enough to trade from.
However, most brokers also offer free demo accounts so you can try trading currencies on their software without using real money. Which is what I recommend doing first after learning the basics to see if it’s really for you or not.
September 8th, 2010 at 4:54 pm
As in most securities, the biggest risk is that you could lose your entire investment. However, most Forex brokers use trading platforms that will close your open trades if the loss brings your account down to the point where a “margin call” would happen. It is unlikely that the entire investment would be lost, as the broker will protect himself by closing your open trades if the loss approaches the level that would require him to ask you for more money to cover any further losses.
Forex trading is an excellent way for a small investor to get started, though, as most Forex brokers will permit opening an account with as little as $100 USD and to begin trading in a “micro account” which moves only $.01 USD for each “PIP” (price point). That means that you can try out various trading methods with very little risk. Additionally, most Forex brokers will provide a free “demo” account where you can practice with actual live trades in real-time with “pretend” money until you find a trading method that consistently provide a profit.
Overall, I personally don’t think there is a better way for a novice to begin to “get his feet wet” in live trading “real time” than in the Forex market.
One very important feature, though, is that a Forex trader should NEVER have an open trade without a “protective stop” order that will immediately take him out of his position if the market quickly or unexpectedly turns against him. That way, you have a predetermined amount of loss that you would realize and won’t wake up one morning and find that your entire trading account has vanished.
So, trade with very small amounts of money, use a protective stop, try out several trading methodologies until you find a profitable system on a consistent basis, then increase your trade size based on the total balance in your account. Done properly, trading Forex can be very profitable because of the volatility in the market. Done improperly, you can “lose your shirt” very quickly.