The Forex (Foreign Exchange) market is the biggest capital market in the world with a daily turnover of more than  US $ 3.2 trillion. In this market you can trade and enjoy the following advantages:

• New source of return to your portfolio beyond stocks and bonds

• Potential additional yield from high interest currencies

• More risk diversification to your portfolio beyond stocks and bonds

• Possibility to trade heavy macro economic events and trends

• Numerous trading opportunities for technical and short-term traders

• Profit from stop losses, high liquidity and safety

1.) Not Using a Stop/Loss Point for every trade

- This sounds like it should be a no-brainer, especially if you are using high leverage. Just because you think that the market will do something doesn’t necessarily mean that it will. The market can swing very quickly in a direction and if you are on the losing side of the stick, you can quickly watch as your account gets wiped out. In some events, like trading the news, a stop/loss point can be extremely critical as a lot of trading platforms will actually slow making it hard for you to cancel trades. A stop/loss point will help you buffer some of the losses, should you be wrong.

2.) Not placing the stop/loss point in the right position

- It is not enough to have a stop/loss point in place. You have to know about where to put it so that if the market whips saws, your position isn’t closed automatically. A lot of traders accuse the powers to be of messing with this and actually causing whip saws to happen to knock out these positions. The amount of leverage really comes into play here. If you can’t afford to place a stop/loss in the 25+ pips range, then you should reduce your leverage to make it happen. I can’t say how often I have seen my position get closed because my stop loss point was set too low only to watch it rise past the number and into the areas I thought it would rise.

3.) Not readjusting the stop/loss point once profit is realized

- It is great when you are in profit. It is not so great to watch as your profit starts to shift back down to its original point and you wind up losing pips to the spread. Once you realize profit, readjust your stop/loss points so you can make something.

4.) Not understanding trends

- If you have never read the Dow theories, you should. Basically all good traders know that you should ride trends until there is evidence that the trend has changed directions. Going against trends is a lot like going against the current. If you are going against the trend, it is likely that you are fighting the momentum of the direction the market is headed.

5.) Not closing out your position during the event of major Forex news

- I know a lot of traders that trade the news exclusively. This is good but you have to understand that news about Forex can create major swings in the market and spark ” minor trends “. In other words, the market may be going up and you may be in profit and then some major Forex news comes out, essentially wiping out your profits. Worse yet, you don’t have a stop/loss in place and you really lose….

6.) Not checking other time frames to accurately predict the market

- I am not about to go into my spill as to how much I hate intra day trading and the shorter time frames. However, many beginner Forex traders will naturally be inclined to trade in 5, 10 or 15 minute time frames. Why? Well, I guess because profits and losses can be realized more quickly and there is a sense of achievement and immediate fulfilment when you are trading within shorter time frames. However, most of these people don’t take into account the secondary trends happening with the daily and weekly charts. If you are not analyzing multiple time frames, then you will be left scratching your head when the market moves against you. Once again, it all boils down to understanding the Dow Theory and how it moves. If you get a clear understanding of trends then you won’t fall into this pitfall.

7.) Not understanding how Trader’s Remorse works

- You are analyzing the charts. You have your support and resistance numbers set and one of the currencies you are watching suddenly breaks the barrier of support. You immediately jump into the trade, betting that the market is going to go up. It does….for a second…only to fall back to its original support/resistance line. What just happened? You have just been bitten by something called trader’s remorse, a point where a breakout is tested and loses. I am not going to go into trader’s remorse other than to tell you that it happens and accounts for a ton of losses.

8.) Not implementing a risk/reward plan

- I am going to say this once. Not all trades are created equal. Some trades are better than others and if you can only make the trades that have a high chance of profitability, you would be better served betting in the casinos on the roulette wheel. You can easily develop a risk/reward plan by understanding that the market traditionally will pull back or rally to certain percentages, otherwise known as Fibonacci numbers.

9.) Not having a Plan to Win

- Plans is easy to come by. Many people have a plan. What is difficult is when it is time to put that plan into action and still being able to get all of the pieces to fit. You may know that the dollar is going to drop but you may not know that there are millions more people just like you that are waiting for that moment to purchase American currency. That will drive the price right back up and depending on which currencies you are trading and the stop-gap measures you have in place to avoid heavy losses, you may find yourself on the losing end of the trade. Make a plan, plan for contingencies and you can avoid most of the dangers of Forex Trading.

10.) Not having control of emotions

– The biggest difference between many winners and losers when it comes to gambling is that the vast majority of people will allow emotions to control many of their actions. Forex Trading is and should not be a gambling situation. It must be run as a business. As such,you will have to make certain choices you like and some that you do not. Do not give in to hunches or feelings. You may win on occasion but you are certainly going to lose in the end. Base your decisions on verifiable facts and known methods and you should be able to increase your chances of success and Avoid Forex Dangers.

11.) Trading on margin without fully understanding what it means

-Margin trading can make you responsible for losses that greatly exceed the dollar amount you deposited. Many currency traders ask customers to give them money, which they sometimes refer to as “margin,” often sums in the range of $1,000 to $5,000. However, those amounts, which are relatively small in the currency markets, actually control far larger dollar amounts of trading; a fact that often is poorly explained to customers. Don’t trade on margin unless you fully understand what you are doing and are prepared to accept losses that exceed the margin amounts you paid. Again a big dangers of Forex Trading.

A smart person who is wise to the dangers of Forex Trading takes the money they have set aside for their Forex account and divides among several different opportunities. Of course,there are more dangers of Forex Trading but if you stay disciplined to these basic tenets, you have a better chance of making profit. Forex trading is not a game for those that think they can profit quickly although you can. It is all about understanding the fundamentals of trading and how to piece them together to make your trades more profitable. Understand certain Forex fundamentals and you will be leap years ahead of most traders. Even though this market is highly profitable and your money is 100% liquefiable and not tied up in currencies in which you have to wait or pay a penalty for withdrawing, you still need to have a great understanding and education on Forex Trading in order to succeed.

Security

What is the point of opening a forex account if the funds we deposit will be unsafe with the broker, or worse yet, will be stolen and misappropriated? What is the logic of studying analysis and currency fundamentals if the profits that we make are pilfered by shameless crooks, or squandered by irresponsible individuals who cannot even manage themselves decently?

Thus, the first necessity for the right broker must be the safe and reliable track record of the firm. On the other hand, it is clear that the retail trader possesses neither the tools, the time, nor the expertise for determining which of the brokers are reliable, and which are not. Fortunately, the regulatory authorities in this country and in other financial centers of the world do their best for screening and weeding out the unreliable ones among the many decent firms. Our best course is to ensure that the broker we choose is a member of FINMA in Europe or NAFTA, and is registered with CFTC in the US, and with other relevant authorities in other parts of the world.

And last but not least, to make the task even easier for you, we have reviewed some of what we believe to be the best and most reliable firms in the market. All that you need to do is to go and check out the relevant section.

Initial Deposit

Unavoidably, the second most important variable in our equation for comparing brokers is the initial deposit requirement. Many traders prefer to begin their careers by risking very small amounts which leads them to seek the broker offering the lowest initial deposit requirement naturally. This reasoning certainly has its merits; however, the initial deposit requirement should in fact be one of the last considerations in choosing the best broker for you, unless you really have a very small amount of capital that you want to risk for forex trading.

A serious broker offering excellent services may choose to keep the initial deposit requirement relatively high in order to ensure that the clients are serious about their trading practices. In addition, forex is usually so volatile that a less than optimally capitalized account is highly likely to be wiped out during the ordinary fluctuations in the market. We have already discussed the difficulties associated with undercapitalization, and those who have read that article should have little trouble in understanding the reasons behind our deemphasizing the importance of initial deposit requirements.

It is self-evident that a beginning trader should only risk the amount that he can comfortably afford to lose. In that sense, the initial deposit requirement of the broker should never be more than what we can afford. On the other hand, beginning our career with a pittance like $10-50, and trading at 10:1 leverage cannot be considered a wise choice. Trading with such small sums is similar to trading in a demo account, and the emotional lessons gained will probably be of little value.

Just like anything else in the world, forex trading does have its own myths that most of the time makes a forex trader lose more than win more. Of course, its okay to know what these myths are but it doesn’t mean you have to believe them.

One forex myth say that in forex trading, there will always be somebody who can give you success.

Day trading is also another myth that you should avoid. Remember, daily volatility is at random. You can never calculate the odds in forex trading, so you can never really say that you win more in.

Working hard in forex trading is good, but working hard means getting the right forex education and learning everything that needs to be learn. Being a hardworking trader with no knowledge at all will do you no good. So, no matter how much effort you exert in forex trading, if you are not doing the right thing, you’ll only lose. It’s better to keep a low pace while doing the right thing, rather than being aggressive without earning anything.

Lastly, you need not to have a complicated trading system to help you out in your forex business. Remember, the simpler the better.

The “FPA” or “Fee Payment Authorization” form that you sign is the means by which FXCM and PACE Capital receives compensation for managing your funds during the various procedures that need to be monitored for the secure execution of trades throughout the day. There is a management and performance fee but note that the performance fee is applied to “net new gains” only and not the gross balance in your account.