Monday 13 October 2014

6 Hidden Dangers of Forex Trading Revealed

Introduction

People who start trading in Forex as a newbie are attracted towards stock market trading less and more towards the high yield potential of the market. One can hear numerous stories about people making 60% monthly ROI and wanting to make more and more money. As a result of which many new traders are tempted towards Forex and consider it as an ideal choice to make some quick money. There are untold risks in Forex that one should take into account because this industry has its own set of rules and regulations. There are 8 hidden dangers of Forex that are discussed below:
1. Not Using Stop/Loss Points: This really sounds like a no brainer to the traders when they are putting in a very big leverage. The market is really volatile and one never knows when the market can swing the other way contrary to one’s expectations. One moment you are on the winning track and the next moment you find yourself on the losing side of stick. In no time the trading account can be wiped clean and it can sweep one off their feet. So for a trading platform, stop/loss is very crucial because it can buffer the trading losses.
2. Unable to Put Stop/Loss in Right Position: Putting a stop/loss in the trading would not serve any good. It is important to understand where to put it in a proper position so that if the market tumbles at any point of time, your position is not affected greatly. If traders are unable to put stop/loss in the range of 25+ pips, then it would be best to minimize the leverage.

3. Stop/Loss Readjustment: Most of the traders are unable to get the stop/loss adjusted after when they have achieved profits. As a result of which the profits so gained are shifted back to the original point. This in turn makes the trader lose their pips. So get the stop/loss readjusted at a frequent interval of time.
4. Improper Understanding of Trends: For people who have never read the “Dow” theories, it is time they should start reading about it. All the good and experienced traders are able to use the rising trends until the market starts changing directions. You should not go against the trends because it would mean going against the flow. Once you start moving against the market trends, you are left fighting the momentum of directions.
5. Unable to Close Positions after Forex News: There are many traders who are trading the news in an exclusive manner. This is a very good practice but one needs to keep one thing in mind that Forex news can cause ripples in the market and swing the stocks either in your favor or against.
6. Improper Implementation of Risk Plan: One should understand that the not every trade on Forex is created equally. There are some trades that are better in comparison to others and it is very difficult to select such trades that can bring profitability. But such thing is not practical because there are chances of losing also. So it is important that the trader should implement a proper risk/reward plan after understanding the proper flow of the market.

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