The advent of internet connectivity came with so many blessings in terms of investment opportunities. Nowadays, as long as you have an internet-connected device, you can start making instant profits on the forex markets wherever you are.
Within minutes, you can open an account, make a trade, and withdraw profits. However, there are forex trading strategies that only work best with experienced experts and can be very dangerous for beginner traders.
There are others that even expert traders shouldnât attempt cozâ they are outright stupid.
The following 5 moves are some of the most dangerous traders should not attempt.
Dangerous Move #1. Jumping In Head First
It is understandable to be excited about the forex market. It is an investment opportunity that can make you very rich in a very short period of time. However, before beginning your journey as a trader, take time to learn about the forex market.
Get to know what makes it tick, how profits are made, the terminologies used by experts, how to conduct accurate market analysis, and the best brokers to use. Take time to create a strategy and test it thoroughly.
Dangerous Move #2. Straight Out Live Trading
Very many beginners take demo trading as a sign of weakness, as a delay to profits, and as a waste of opportunities. This is the wrong approach.
Once you have learnt all you can about the forex market, use a practice account to enhance your learning and get the experience of trading on real time data. This will prepare you better for managing your live account.
Dangerous Move #3. Minor Currencies
The minor currencies have low liquidity levels and that makes them safe to trade in most of the time. They also usually experience wide pip movements and this enhances their potential for profits.
However, as a beginner, stay away as much as you can from cross currencies and exotic currency pairs even where the currency is for your country of origin.
Their markets are much harder to analyze and much harder to accurately forecast their price movements. Their wide pip gains/losses mean you can instantly wipe out your account without warning.
Such pairs are for experts who have had a long career dealing in those currencies or watching their movements.
Dangerous Move #4. Leverage
In theory, it is very possible for a trader to invest $20 today and withdraw a million bucks next week in profits. This is due to the high leverage levels offered by forex brokers. Nevertheless, any forex trader should use leverage very wisely.
A beginner, especially, should limit himself or herself to leverage levels below 1:100. This is because leverage works both ways. A trader investing $1,000,000 today on excessive leverage can end up with only $20 in just a few days.
Dangerous Move #5. Not Diversifying
I am sure you have all heard the wised adage about not putting all of your eggs in the same basket. This is indeed very wise advice for a forex trader. Do not invest all your funds in one trade no matter what âinsider informationâ you might have acquired.
Admittedly, if such predictions were to come true on the insider information, your profits could be such that you may never need to work again all your life.
However, in the very likely event that the trade doesnât go as expected, then you will have bankrupted yourself in that single trade.
Photo credit: Forex Learning
