RULE #1 - NEVER EVER Risk More Than You Can lose
Yes, this is the same rule as you'd use at a casino. Never bet anything that you could never afford to lose. You don't want to be losing your house over this hobby, do you? Do not jump into
Rule #2 - Let An Uptrend Continue and Bail Out of Lost Cause Downturns
This advice is basic stock trading 101. Long story short, don't get too jumpy and sell your shares early on an uptrend. You never know when it's going to come back down. Likewise, sometimes you just have to cut your losses on a downtrend and get out before you completely lose it all. Try to break the idea that you're going to get rich super fast. While its certainly possible, you should listen to the saying "the trend is your friend". In short, let your profits run the course and cut your losses early. Rule #3 is going to introduce an idea that is going to help with both of these problems.
Rule #3 - Use Stops to Your Advantage
A stop order is simply and order that allows you to close your position when the currency drops to a certain price. This is ideal for cutting your losses. Here's an imaginary scenario. For example, say you buy some currency at 1.9500. You obviously want the price to go up, and let's say it does go up a bit, to 1.9800. Since its going up, you don't set a stop order, and next time you check it it plummets to 1.8700. If you would have set a stop order at, say, 1.9400 you could have dramatically limited your losses.
Stops are not just for limiting your losses though! They're also very useful in riding out an upswing trend. Let's use the above example. You buy some currency at 1.9500, then it upswings to 1.9800. Now you decide how close you want to push your stop and how much you're willing to risk. If you're happy getting out around 1.9800, you can set the stop at 1.97XX. If you want to risk a little bit of a downswing for a possibility of more upswing, you can set the stop order at 1.96XX, either way you come out ahead of your initial 1.9500. As you can see, stop orders are extremely useful for cutting your losses before they get out of hand, as well as making sure you can get out when the uptrend starts to fail.
Another option you have is seeking out like-minded individuals through the internet or local interest groups. Find people that share Forex interests and get together. Talk about it; share your experiences while trying to learn from theirs. Maybe you will get lucky and learn a great deal from a seasoned Forex veteran or a Forex professional. When in doubt, you can always pay a professional to handle this for you, but then it wouldn't be much of a hobby now would it?
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