All too often people get into forex trading without fully appreciating the immenseness of it all. Not only is it a huge market –that much is a given, but the truth is that there are numerous other things that need to be considered carefully, as they're all going to play a role in your success or failure.
Trumping the rest, these are the ‘must know' essentials of successful forex trading:
1. You must know when to fold
Hanging on to a bad investment just because you don’t want to make a loss is a bad idea. Sure, it might go up eventually and you won’t make a loss at all. Sure, you could even make a profit if you hold on long enough. But if you fold at the right time instead, you can limit your loss, free up your funds, and make other investments that help you to profit even more!
2. You must know how to limit your risk
Risks play a big role in forex trading, and if you can limit yours, you’ll be well on the way to success. Some parts of limiting your risks tend to be easy; for example, you could set limit orders and stop orders on your trades in order to ensure that you don’t end up losing too much, but rather sell at just the right time. Other aspects are harder, and require experience to master.
3. You must understand the market
No two ways about it, when you’re playing in the forex market, you need to understand how it works. And this means that you need to know more than just the supply-demand stuff that almost every Average Joe would know. Acquiring knowledge and understanding the market is something that is a combination of experience, and your own initiative to read up on the forex and find out more.
4. You must be willing to fail
Despite making every effort, despite limiting as many risks as you could, and despite spending countless hours studying the forex market, sometimes things just do go wrong. When they do, you shouldn’t fall to pieces, but should pick yourself up and accept that failure. In fact, better yet: Learn from it!
5. You must manage your capital well
All said and done, your capital is what keeps you afloat on the forex market, and managing it well is as important as anything else. Don’t spend it all in one trade, don’t take unnecessary risks with it, and no matter what, don’t spend more than you can afford to.
If you can master these ‘must have’ essentials, then you’ll find that the forex market is an incredible opportunity that is just waiting for you to take advantage of it. However if you can’t, then you might be on the quick road to disappointment.
So go over the list once again, and be absolutely sure that you’re prepared to take on the forex market head first!