Five Online Forex Strategies to Avoid

Online forex trading is huge.

The daily trading volume of online forex trading has topped $4 trillion dollars. A lot of this volume comes from the retail forex trader. The facts are that most part time traders make very little or no money from their trades but if you avoid these five strategies, you will be on your way to making large returns from forex.

Forex Robots

Forex robots do all of the work for the trader much like autopilot in an aircraft and for those beginners who aren’t confident in their abilities, it’s no wonder that Forex Robots’ popularity has grown so rapidly. These robots promise big gains but unfortunately, that’s rarely the case.

Most forex robots don’t make money for the trader. Reading reviews of many of these robots state that sometimes more than 20% is lost by completely automating your trading.

Nothing beats old fashioned research and experience.

Avoid Multiple Currency Pairs

It’s always best to trade in what you know. Master the basics before moving on to bigger systems. If you live in America, trade the dollar against a company where research is easy to find and understand. Trading in currency where you don’t understand the countries, their customs, or their people will probably not pay off if you’re a new investor.

Don’t Overleverage

Online forex traders can get leverage ratios of 50:1 to as high as 400:1. While this allows the investor to make substantial profits with a relatively small investment, it also allows them to lose money that they don’t already have. A 50:1 ratio not only multiples your profit 50 times, it also multiplies your loss. That’s the dangerous part of leverage.

Don’t Trade Against the Market

Value investing, swing trading, and day trading are all popular online forex strategies but for the beginner, trying to make money by investing against the market is a sure path to failure. Those who trade by trying to forecast market tops and bottoms are rarely correct and when they are, often it was pure luck. When you see a trend forming, invest with the market. Beginning investors don’t have the tools or the knowledge to analyze the professional grade charts to try and predict short term market movement. Do what the market is doing but don’t wait too long to get in.

Don’t Choose a Broker Without Due Diligence

If you don’t perform your due diligence and research all of the online forex brokers exhaustively, you may end up the victim of a scam. There are a lot of forex scams taking multiples forms and your broker could knowingly or unknowingly be involved. While you must have a broker, find the right one based on a track record of outstanding customer service.

Every investor can speak of their mistakes and how they learned from them. Each of us must do the same but avoiding these five strategies will surely help minimize your losses as a beginner.

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