Forex trading is the exchange of currencies from one hand to another in the currency market. Investment companies do this as well as banks but individuals can also play the currency trade through buying and selling. You buy at a lower price and then sell it or exchange it for a much higher rate of conversion.
Forex trading however can be a risky business to get into but once you get the hang of it, it an yield you a lot of gains. All you need to do is minimize your risks and errors in this volatile business and you are on your way to a bit of financial freedom.
Here are some of the mistakes that people make when they trade currencies. Read each one before you get into forex trading.
1. Never blindly trust people
No matter how good they supposedly are and no matter how great their credentials are in forex trading, there is still some room for mistakes. In fact, some people in the industry who have years of experience get too cocky and lose money in the process. If you are serious about going into forex trading, you must know the business yourself. You must also understand how the system works and be able to follow why a currency appreciates and depreciates. That way, you won’t just rely on the advice of people but also be able to make your own analysis and decisions.
2. Never rely on news
News may claim to be facts but often these are just one perspective or from one chunk of the bigger picture. If you want to really know about the business, do not rely on the news. Rely on your own analysis and then compare them to other peoples analysis in newspapers and television. That way, you will learn the business on your own. Besides, you should not believe everything you hear or read.
3. Buying low and then selling high
Although this is the theory for forex trading, this does not mean that you should wait for a currency to become really low, buy it and then wait again for it to recover and surge at higher rates. This is not the way to do it. Forex trading involves a much faster exchange of currencies. Buy low and then sell when it gains a point. You don’t have to wait for a peak to do it.