Feb 13, 2019

Mistakes in Forex Trading

Mistakes in Forex Trading

It may sound tempting to open an account with a forex broker with a minimum deposit of 25 euros - but just because it is possible, it is still not recommended.

1. Why Most Forex Traders Fail: The Lever
Most professional Forex traders trade a standard lot for every 50,000 units in their account. Less experienced foreign exchange traders are often more risk-averse. 100k standard lots with a 2,000-unit account are not uncommon. This is a problem that will sooner or later break the neck of most Forex traders. They do not understand how the lever actually works and do not have nearly enough seed capital.

A micro-account should have at least 1,000 euros’ credit, 10,000 euros are necessary for a mini-account and a standard account is only recommended at 100,000 euros. If you cannot raise 1,000 euros, you should renounce forex trading until it can raise this sum without any problems. In the meantime, he can practice in demo accounts to successfully trade forex without taking a risk.

Most new traders do not fully understand the concept of leverage and margin. Trading with leverage means being able to trade a large amount of money while using little or no money at all but lending the rest. Forex brokers offer very high leverage. In this way, it is even possible, for example, with the 25-euro account to trade up to 2,500 euros. As long as the trade develops profitably, this is not a problem. Then the lever can be used to generate significant profits, which will then pass into the hands of the trader. For example, if a trader opened a position and traded 100,000 euros at 1,000 euros, the leverage would be 100: 1. The position closes with a profit of 1,000 euros. The broker gets the borrowed money back and the trader receives his bet plus profit and has made a profit of 1,000 euros. If all the money had belonged to him, he would not have been able to claim a 100% return, but only a 1% return. This is the big opportunity in forex trading and leverage products in general.

No comments:

Post a Comment