You could lose money on the Forex market. But even the bad has a good side: you don't have much to lose. If you follow the rules of money management in Forex, you can limit how much you lose. Even if you lose half the time, you can still make money in this market.
First of all, you need to know that you will lose sometimes. Everyone loses at some point in any market. No one is perfect, and no one makes the right choice in every trade. No matter what the sales materials say, there is no magic software or enchanted system that is always right. So, before you start trading, be ready to lose some money.
On the other hand, the most you can lose on the Forex market is the price of the lots you bought. Even though this amount varies from broker to broker, the average price of one lot in a mini account is $100. And that's it; $100 per trade is the most you can lose in a single trade. Even if you don't set a stop-loss, if the trade goes wrong and the market moves against you, the market maker or your broker will close it when the loss reaches $100. This is meant to protect their investment, but it also protects you and your account's equity. Because of this, your broker will never ask you for more money to cover a risky position on the Forex market.
But you don't want to stick with a losing trade until the broker closes you out. Instead, you want to limit how much money you lose. And you can do that by controlling how far down you follow a losing trade by putting a stop and limit on each order. When the market reaches the bail-out point, your order is automatically cancelled.
Set your stop far enough away from the purchase price that it won't be triggered by normal market jitters, but not so far away that you lose more money than you're willing to risk. If the market is in a range, look at the support and resistance points on the charts.
Remember that even if the market breaks out of a range, the previous low price is likely to become the new high price in a bear market, when prices are falling, and the previous high price is likely to become the new low price in a bull market, when prices are rising. Setting your stop at one of these places is smart.
On the other hand, you can control both how much you lose and how much you win by setting your limit at least twice as far from the entry point as the stop. And when the trade goes your way, you make more than twice what you lose when it doesn't.
So, even if you're only right half the time, you can still make money on the Forex market if you know how to handle your money well.
