3 FOREX Tips that Can Lead to Disaster

Taking FOREX (foreign exchange market) tips from just anyone is a recipe for disaster. The FOREX market is the most dynamic and fast-paced market in the world. It boasts a trading volume of over $2 trillion per day. Because a lot of money moves through the FOREX market on a given day, it represents a huge risk-vs.-reward scenario. If you take advice from someone who is not qualified to give it, you could find yourself with an empty account. Here are a few common FOREX tips that can lead to disaster. 

1. Higher Leverage is Better

When you trade FOREX, you must do so with leverage. The price of a currency pair only moves a few decimal points every day. Therefore, in order to capitalize on any movement that small, you have to use leverage. A common leverage for a FOREX account is 100:1. This means that for every dollar of your money that you risk, you are actually risking $100. With this kind of risk, it does not take very much movement to make a big difference in your trading account. This is why there is a lot of money to be made and a lot of money to be lost as well. You can even get leverage that is as high as 500:1 with some FOREX brokers. While this can help you in some ways, it can make trading very dangerous for you. 

2. Trade 24 Hours A Day

The FOREX market is the only market that is open 24 hours a day for 5 days out of the week. With this capability, many new traders think that they should trade as often as possible to get the best results. While it seems logical, this is not always the case. 

Even though the market is technically open for 24 hours a day, they have different sessions around the world where the majority of trading takes place. The big three sessions are the London session, the New York session, and the Asian session. During these three sessions, there is a huge amount of trading going on. Therefore, the market behaves differently during these sessions. This can affect your trading strategy greatly. A good trading strategy during the Asian session is not necessarily a good one during the London session. If you like to trade the GBP/JPY pair, it will experience the most movement during the Asian session and during the London session, since the people that live in these areas use those currencies.

3. Trade With No Stop Loss

Many trading strategies that are available will actually encourage you to make trades with no stop loss. For whatever reason, they think that it gives you a better chance of winning. However, this is a great way to blow out your account in a hurry. All it takes is one freak move in the market, and your account is gone before you can do anything about it.