Don't be a sucker.
One of
the first things you must learn about the Forex market is that although it is
enjoyable and exciting, there is no magic button that will instantly turn your
pennies into millions of dollars. You may have already heard about Forex scams
that are filling the marketplace. These companies purposely mislead people into
thinking that making money in the Forex is easy and that they have found the
“Magic Solution” to raking in booku bucks with a simple click of a button.
Sadly,
the number of Forex scams is rising. The Commodities Futures Trading Commission
(CFTC) released a report citing that in recent years, they have seen a sharp
increase in the rise of Foreign Exchange scams. The CFTC warns consumers to be
cautious of sales solicitations in newspapers,
radio or television. You’ve
probably even seen some of these companies. I hear about them all the time from
people whenever I try to explain the Forex. The first thing they say is that
they think the Forex is a scam. That makes me so angry! The Forex is a
tremendous investment opportunity for people and because of these scammers,
they miss out on a good way to make money.
The
truth is that no matter how you slice or dice it, education is the only fool
proof way to consistently make money in the Foreign Exchange. Even after you
finish reading through BabyPips.com, your journey as a FX trader is only the
beginning. I have never met a successful Forex trader who stopped learning.
There is always something new to learn and you must actively seek out as much
information as you can.
The best investment you can ever make is in yourself.
Don’t
spend your money on a company that promises huge returns; even if they show you
their track record. It might look pretty and colorful; and I’m sure that the
line on the graph that seems to keep going higher and higher makes it look like
there is no way you could lose money, but don’t let them fool you. In fact, I
could take my broker statement right now, touch it up with Photoshop and voila!
– I have now just become the most successful trader on the planet. Pretty
impressive huh? I know I’m laying it on pretty thick, but I really want to
prevent you from falling into any traps. Instead of giving your hard earned money
to someone else, you could put that money aside into a trading account and take
the time to educate yourself.
Notice
that I didn’t say you should put your money into a trading account and start
trading.
Keep
that money in your account and gradually add to it as you continue to learn.
Before you know it, your account size will be bigger than you realized, and to
top it off, you’ll have a wealth of Forex education under your “traders” belt.
So
remember, Forex scams DO exist. Be wary of them and hold onto
your money. The good news is that there ARE legitimate Forex companies out
there. Make sure you do thorough research on a company if you are thinking
about giving them a shot. Ask other traders on the forums if they've had
experiences with them. There is a wealth of information on the Internet so do
your homework and you’ll be just fine.
Leverage the Killer
Most
professional traders and money managers trade one standard lot for every
$50,000 in their account.
If
they traded a mini account, this means they trade one mini lot for every $5,000
in their account.
Let
that sink into your head for a couple seconds.
If
pros trade like this, why do less experienced traders think they can succeed by
trading 100K standard lots with a $2,000 account or 10K mini lots with $250?
No matter what the forex brokers tell you, don’t ever open a “standard
account” with just $2,000 or a “mini account” with $250. The number one reason
new traders fail is not because they suck, but because they are
undercapitalized from the start and don’t understand how leverage really works.
Don’t set yourself up to fail.
We recommend that you have at least have $100,000 of trading capital before
opening a “standard account”, $10,000 for a “mini account”, or $1,000 for a
“micro account”.
So if you only have $60,000, open a “mini account. If you only have $8,000,
open a “micro” account. If you only have $250, open a “demo account” and stick
with it until you come up with the additional $750, then open a “micro
account”.
If you
don’t remember anything else in this lesson, I plead that you at least remember
what you just read above.
Okay,
please re-read the previous paragraph and ingrain it in your memory. Just
because brokers allow you to open an account with only $250 doesn’t
mean you should and I’m going to explain why.
I
believe most new traders who open a forex trading account with the bare minimum
deposit do so because they don’t completely understand what the terms
“leverage” and “margin” really are and how it affects their trading.
It’s
crucial that you’re fully aware and free of ignorance of the significance of
trading with leverage. If you don’t have rock solid understanding of leverage
and margin, I guarantee that you will blow your trading account.