Trading Forex: Eggs and Baskets

Filed under: Learn Forex Trading |

 

Screen shot 2013-07-18 at 09.59.35The famous old saying goes: “Don’t put all of your eggs in one basket”, and this saying is especially relevant to trading the forex markets – in more ways that one.

 

One way in which you could apply this knowledge in the forex markets is when considering money management. If you find a really good trade setup that you are convinced will be a winner, don’t risk too much (or all!) of your capital on the trade. This is a case of putting all of your eggs in one basket. Your eggs are precious, so carry them separately, just in case there are any accidents along the way. Personally, I only risk 1% of my bank on each trade, no matter how good looking the setup is.

 

A lot of people seem to also put too much hope into being rich and successful through trading the forex markets. Beginners naturally explore this route, and begin to think that trading forex will solve all of their problems. But unfortunately, this is rarely, if ever, the case. This is another case of putting all of your eggs in one basket – but this time they are emotional eggs; and these are even easier to break! Therefore, it is better to be involved in a number of projects (such as property investments, starting a small business, or trying to make a hobby become profitable), with forex just being one of many things that you do. That way, you have a much better chance of one of your projects coming good.

 

In my opinion, becoming consistently profitable at trading forex takes a long time, and a lot of hard work and dedication – work that will not be done if you don’t enjoy the process. So my advice is to do it like a hobby to begin with, like playing a football fantasy game for example; and when you get better, start to risk a little money, and then a little more. And who knows, maybe one day, you just might be good enough to make a living from trading.

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