Forex trading is risky and you may lose what you invest. If you are using leverage, you may even lose more than what you deposited with your forex broker, since you are trading with borrowed money. (You can read more about this in our article Leveraged Forex Trading.)
The forex market is notoriously difficult to predict, even for professional forex traders with a lot of experience. A multitude of factors can impact the price of a currency in relation to another, including psychological factors such as herd mentality among traders. From a risk-mitigation perspective, forex trading can be a great tool for diversification of your investment or speculation portfolio, but viewing it as a panacea is inherently risky.
It is not advisable for the hobby retail trader to put his or her entire investment or speculation portfolio into the forex market. One great method is to start with a small deposit and then gradually build up ones bankroll from that deposit. Another alternative is to deposit a specific percentage of ones paycheck into the forex trading account each month, and never do any additional deposits. By having an investment system in place, it is easier to resist the temptation of hauling large amounts of money into forex speculation during successful periods of trading. Never risk more money than you can afford to lose on the fx market.
There is also the issue of finding a suitable and reputable retail forex broker. There is no unified, centralized market where all forex trading takes place. There are many different trading places available for those who wish to trade one currency for another, from huge trading
platforms only accessible by banks and other huge traders, to retail trading platforms for private hobby traders. Different trading platforms can fall under different jurisdictions, and it is also important to realize that each platform comes with its own set of terms and conditions. There are for instance trading platforms that are “market makers”, where you in essence trade with the owner of the platform rather than trading with other traders.
Steps have been taken towards the creation of a more centralized and transparent solution for retail forex trade, where broker’s can’t re-quote prices or trade against their own clients, but these plans have not yet come into fruition.
Important!
Start with earning your money slowly to create a solid ground of funds. Do not get greedy and think that you will earn a lot more money by staking more. Always remember that you can lose as much as you win. Be careful with financing your stakes, only use loans to finance every day needs outside your trading career.
It’s better to lose what you have then what you owe.
However, if you still need extra funds to make a fast and bigger trade, you could use fast and small loans that you can pay off no matter if you earn or lose money. Read more about small and fast loans.