Forex trading isn’t a breeze

NO MARKET FOR BEGINNERS In trading you go through the university of life experience, but there is no shortcut – Garth Mackenzie.

Phoenix Investment Analytics’ Peet Serfontein cautions that it isn’t the ideal place to learn how to trade.

“It operates 24 hours a day. It’s also very liquid and transparent. This means it is an advanced market.

“If this is where you start trading, you are starting at the wrong end of the learning curve.”

Firstly, unlike stock markets, the global currency market never closes.

“You can put your stop losses in place, but somewhere along the line you need to sleep,” Serfontein says.

“So you can easily get into trouble if you haven’t actioned your stop losses properly.”

The second major risk is that forex traders look for very small moves.

“To make any real money, they must therefore leverage their positions. This creates the potential for upside, but also heavily exposes them to the downside.

“It is all good and well until it goes wrong. Then people are sitting with a trade where they are losing money and they don’t know how to handle it,” says Mackenzie.

“A lot of people go in without a strategy. They have no idea how much money they should be placing on every trade. They make basic mistakes like adding to losing trades or fighting momentum.

“These are all fairly basic things to get right, but they are also what most average retail traders get wrong, and that’s where they lose money.” Understanding the market and how to trade takes time.

Mackenzie says traders must be prepared to dedicate years to becoming knowledgeable and successful.

They must also appreciate that they will probably lose money before they make any.