Trading on the forex involves a lot of risk.  Along with the risk comes the possibility of losing a lot of money if you don’t know how to trade the market correctly.  You can reduce the risk of making costly mistakes and become a successful currency trader if you follow a few rules.

Know the Currencies

Know the currencies you intend to trade in.  Conduct a forex market analysis of each currency you plan on trading.  Don’t trade currencies blindly without doing research. Develop forex strategies.  Don’t trade in every possible currency just because they are available for you to trade in.  You can make money on each of the currencies.  It will be to your advantage to know everything there is to know about the currency you plan to trade in.

Poor Money Management

Set a limit on how much money you plan to trade everyday the market is open and stick to it.  A lot of currency traders lose money because they are poor money managers.  You should also set the number of pips you plan to make each day and stop trading after you have reached your goal.  You can always set the bar higher as you gain knowledge and understanding about the forex.

Trading without Stops

When two markets, the New York Stock Exchange and the London Stock Exchange are open at the same time the Forex has unstoppable action.  Currency prices rise and fall at a very fast rate. This fast rate is where the risk comes in.  Trading on the forex involves pure currency speculation.  No one knows what price currency prices will go.   In order to reduce the likelihood of losing money you should trade with stops.  Set you limit and let the software do the rest.  Soon you will find that you will earn a forex profit in such a volatile market.