I want to start forex, but what if I fail?
I don't know how to do it well.
And for those of you who are worried about forex trading.
Here are some common examples of failure and advice on how to improve.
Patterns of failure in forex
Forex is a trading method that uses the ups and downs in exchange rates to make a profit from the difference.
Trading is available 24 hours a day and accounts can be opened on the same day.
It is a convenient service that even beginners can start with.
However, there have been many cases where people have "lost ¥100,000 in one day" or "lost all their money" in these transactions.
Here are some of the patterns that lead to big losses and failures in forex trading.
Insufficient knowledge of the forex system.
To trade in forex, you need to understand the forex system.
First, how much money is needed to hold one position, and the approximate price fluctuations that result in a loss.
Then, it is a prerequisite to know basic terms and rules such as leverage, short and long.
And then there's the stuff about the risks associated with currency trading.
A common pattern among beginners is that they often make unplanned trades.
In order to trade forex, you should first have at least a basic knowledge of the basics.
High leverage.
In forex, leverage allows you to trade large amounts of money with a small amount of capital.
By increasing this leverage, you want a lot of profit.
In investing, there is a possibility of making a profit and an equal possibility of losing money.
Constantly holding positions.
This is another mistake that beginners tend to make.
They want to make a profit as soon as possible, so they want to hold positions all the time.
In my own experience, I made a profit of about 50,000 yen in the first six months after starting out, which should be called beginner's luck.
However, the market started to fluctuate leading to the Lehman Shock.
My reading of the market movements was off and my account was no longer on fire.
But I couldn't let go of the position, cut my losses and despaired.
Trading is not about making a profit 10 times out of 10.
Even professional traders take the basic stance of trading short term and in small amounts.
In a sense, it is an addiction to always have to hold a position.
Measures to avoid losses in forex
If you make a mistake in forex, it can ruin the rest of your life.
We will tell you what measures you can take to prevent this from happening.
Let's look at them together.
Set rules.
Set rules for forex trading.
Specifically, cut your losses so that your losses do not exceed a certain number of yen.
Do not carry over positions on volatile weekends.
etc., before you start and do not break them.
Also, a note on funds is discussed under the previous heading.
As for funds, basically use your spare money (money at your disposal).
When I was in the previous loss-cut hell, I turned hundreds of thousands of funds from my savings.
However, I was able to make the break without borrowing money, which helped.
Staying within the rules can be painful due to the limitations of what you can do.
But understand it as a norm for fair and safe trading, just like sports or traffic rules.
Gather information about the market.
Currencies fluctuate according to world conditions and events.
First, look at what causes fluctuations.
Typical examples are figures such as indicators and statements by key figures.
The trading system may inform you when the time for the release of those figures and indicators is approaching.
When the Great East Japan Earthquake hit, the yen started the week about 3 yen lower and four days later hit a record high of 76.4 yen.
When you start investing, not only in foreign exchange but also in stocks and mutual funds, you naturally turn your attention to news.
This will broaden your perspective as you start to search for market information.
Trade in small amounts and small lots.
This is the main principle to avoid making the same mistakes as in the example.
It is now easier to start with the minimum amount of money you need to put into a forex account, which can be as little as 4 yen.
The minimum trading unit is the number of lots, but you can trade from 0.1 lot with 1 lot being 10,000 units.
Trading in lots of 1,000 units is safe, although both return and risk are reduced.
Start with a minimal minimum amount of funds and lots.
Conclusion.
We have discussed the patterns of failure in forex trading and how to deal with them.
Let's review what we have told you in the article.
First, the patterns of failure are
Lack of knowledge of the forex system
You set your leverage too high
You hold positions all the time
And the best way to deal with this is to
Set rules
Gather information about the market
trade in small amounts and small lots
and that it is a good idea to do so.
Beginners tend to pursue profits based on their own ideas.
However, investment activities are subject to losses due to the risks associated with such actions.
Keep in mind that investing means putting your own money at risk.