It is at least imprudent to start trading on Forex not making strict rules and getting wise to the trading basics. Look before you leap – or so much time and nerves will be spent to no purpose. Before being flush with money right and left it is better to get insight into capital or money management.

Basic rules are quite simple and they will be useful for any kind of investors. They will be useful regardless of your investments volume.

1. Look for alternatives

Look for beneficial investment objects, fish for information and keep in touch with professionals. Do you want to earn profit? Make efforts! Learn opinions, ratings, brokerage companies’ websites. The opportunities of a modern trader are wide enough and in order to embrace them you should know about them first.

2. Start from scratch

Stock exchange investors use the averaged investment method which means the security papers purchase for the same amount of money in equal time frames. It helps to set limits and avoid serious financial slips. There are cent accounts on Forex, serving as a safe point for start.

And certainly, you should not rush to open a real account – have practice on demo accounts first.

3. Do not put your last money at stake

Any investments are related to risk somehow, that is why the market environment is variable. Do not play with money which you cannot afford to spend. Remember why you came to Forex. Not for blowing off all your capital for sure.

4. Remember: the higher profit – the higher risk

Risk and profit are proportionally related to each other. It should be taken into consideration when forming an investment portfolio.

Running trading on Forex, think well about the leverage usage provided by broker. Leverage will advance your financial options, and in case of success you will benefit from the whole amount deposited, but in case you lose – you risk blowing off all your funds.

5. Diversify risks and observe the fixed limits

To continue the previous point, it should be emphasized that for reducing risks it is reasonable to use different investment tools. Moreover, the experts recommend applying not over 50% of funds available and involve 5-10% of them in one trade.

In a currency market it is important not that how much you earn, but how much you manage to save while you trade. Apply “Stop loss” and “Take profit” instruments to protect your capital.

6. Develop your own strategy

It is better to have a bad strategy rather than none. In addition, all your decisions should be conscious; you have to comprehend market changes and your actions. If the events do not follow your scenario it is better to stand back for awhile. It is also essential to determine your opportunities and goals: what amounts you are ready to invest, how much you are ready to put at stake, and if there is a place for adventurism in your plan?

To sum up – a piece of advice. Never invest the money you borrowed. It is always risky. Do not put money being influenced by emotions or giving way to somebody’s opinion. Also remember that excessive self-confidence will bring you no use. Always be aware of your rights and duties.

Added by InstaForex Staff