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Forex Trading Mistakes - 10 Common Ones That Guarantee Losses

Forex Trading Mistakes - 10 Common Ones That Guarantee Losses



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The Pros And Cons Of Trading Forex

By : Wade Tobins
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There is not other financial market which compares to the foreign exchange currencies market. Trading Forex can be done around the clock all year long, including weekends. Because of its uninterrupted accessibility, trading the Forex market has made the exchange of currencies the largest money making opportunity in the world.

Even without its uninterrupted accessibility, trading the Forex would still be the most user-friendly investment around. Its generous leverage conditions, which run as high as 100:1, allow even the smallest investors to control a considerable amount of currency. Someone with only $1000 of risk capital, for instance, can actually buy $100,000 of a currency to use for trading.

But even with that kind of leverage, no one should start trading Forex without first studying the currencies market for an extended period. Learning to recognize patterns in currency fluctuations is the only way to develop an instinct for when to enter and exit when you are trading Forex.

The Risks Of Trading Forex There is risk involved in investing in any of the financial markets. But thousands of investors have learned that if they use discipline when trading Forex, they have a good chance of clearing a nice profit without risking too much of their own money. With trading platforms capable of instantaneously providing fluctuations in the prices of various currencies, those trading Forex can capitalize on small movements in the currencies markets and make surprisingly impressive profits.

Trading the Forex market is much less complicated than trading stocks, simply because there are only a handful of major currencies. Add that to the high leverage available in the Forex markets, and the correspondingly small amount of capital outlay required, and trading Forex seems even more attractive.

Then consider the ability to trade Forex at any hour of the day or night, and the exodus of traders from the stock market to trading Forex is easily understood. Limit And Stop Loss Orders For those nervous about the risks involved in trading Forex, both limit orders and stop loss orders are available. And because of the enormous liquidity of the currencies market, even limit orders are filled almost instantaneously. A limit order will allow an investor to specify both a buying and selling price, and will not have to pay more or sell for less as long as there is a buyer or seller who will meet that limit. If no one does, the limit order will expire.

A stop loss means that an investor's position in a currency trade will be liquidated as soon as the price of the currency hits that level. A top loss order is a great way to get out of a currency trade which goes bad without losing your shirt.

Trading Forex will also eliminate the commission you have been used to paying your stock broker. That doesn't mean, however, that you can trade for free. Forex brokers charge a "spread" on each purchase and sale you make. You should learn exactly what that spread will cost you before you start using a particular broker, and also investigate any fees a broker might charge you if you hold a position in you account overnight.

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