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.

The Citizen (KZN) - - BUSINESS - Pa­trick Cairns Pay­ing your dues

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.

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