It would be wrong to think of forex trading as gambling. When you play roulette, when you speculate – that’s gambling. But most people venture into forex trading for the wrong reasons. They have false illusions that currency trading is child’s play or that it would make them rich, fast. Ultimately these people loose their investment and then some. And on the other side there are people who make millions from trading in currencies.

There are inspirational stories a plenty, about people who started with a few thousand dollars and then went on to make millions through forex trading. Keeping greed in check and putting emotions aside is the secret to smart trading. Ultimately, forex trading boils down to knowing when to buy and when to sell. You only learn that through experience, currently it’s more of an art than science.

Those who trade for a living keep trying different strategies to find out what works and what doesn’t. All traders are essentially looking for the next trading strategy or model that might give them an advantage and therein lies the problem. Only through experience would you know when to sell. Seasoned traders also lose money but their gains are more than enough to compensate for their losses. Not everyone wins, not all the time. The following basic tips are worth noting if you are just venturing into forex trading.

Keep your leverage in check. The ground rule of risk management is not to risk any money you cannot afford to lose. For starters, avoid high leverage margins. Yes, the gains are higher but so are the losses. Again, use low borrowing margins unless you are able to foresee the future. The same advice applies to overtrading – avoid it. Play it safe until you get a hang of it, trade in small volumes and avoid losses.

Keep testing trading strategies. Everything from politics to the weather affects forex rates. An informed investor always has an advantage. Create new strategies and test them on small volumes, scale up those that work. Always keep emotions at bay, forex trading and emotional decisions spell losses. And finally, avoid speculating, not even if you are in for the long term. Sound information and educated guesses, for lack of accurate tools, are your best options.

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