The possibility of achieving high rates of return when trading forex market attracts many investors who, in the short term you would like to earn big money. There are investors; able in a few months to multiply 5-10 times their forex trading capital, but they are quite rare.

Forex trading provides many investment opportunities but also poses a high level of risk. On the one hand, many web platforms offer very high leverage (1:100, 1:200, and more). At 1:100 leverage. To open the position of 100K euro a deposit a hundred times smaller, amounting to a thousand euros is enough. Average daily change rate of the euro in the first half of 2009 amounted to 2 cents. During the day we can count on earnings of up to 100%

On the other hand, high leverage is dangerous as the market might turn against us. Some investors make a crucial mistake and do not take into account the possibility of loss. A series of losses might occur even to the most professional forex investors. Your account can be left destroyed if you don’t use leverage in proper way. The most common mistake we make when trading forex signal is opening too large positions. The analysis is not everything

Many investors believe that a good enough knowledge of forex signal technical analysis will provide the tools to achieve high profits. They rarely draw attention to other aspects such as the development of a forex signal system of investment transactions, cash management and control of very strong emotions. These elements are as important as good knowledge of technical analysis.

Creating a forex signal system leads to the fact that the investment process becomes more objective. Managing money is speaking briefly opened the volume control position in relation to our capital, and minimizing the risks associated with investing. Finally, it is very important psychological factor. Using high financial leverage delivers a lot of emotions; such forex signal trading requires great discipline and strong nerves.

Investment principles

We invest in the forex markets in order to win. From this it follows that the guiding principle of any investor should be to protect the capital. Unfortunately, most forget about it. This is what experienced traders differ from the average investor is:

1. The ability of cut early losses, while the average investor often leads to the fact that they take huge proportions.

2. Acceptance of large profits, While the average satisfied by a small profit.

3. Control risk in a single transaction the risk is issued a small proportion (2-3%) of capital available for the game on the market. Many investors consider this to be too cautious and risk much more (10-20% or more).

4. Patient seeking opportunities in the market, the search of such transactions for which the ratio of profit / risk is at least 3:1.

Truncate loss

Many experienced forex traders note that it is more important to close position than open it. Skilful closing position allows to avoid large losses, and achieve high profits.The ability of cut losses quickly is more important than the acceptance of large profits on the grounds that even one or two large losses can lead to the end of the game on the market.

The result of the first two factors is that an experienced investor receives a positive long-term rate of return (the sum of profits is greater than the losses). For the average investor usually occurs in the long term negative rate of return. After a few successful transactions come one or two that can ruin the account.

In a single transaction, we cannot exceed the loss of more than 2-3% of the capital. Risking in a single transaction 25% of the capital is too much streatch for the trading account and after two losses can leave us with only half the capital. Recovering is then very difficult and often impossible.

Beware of false signals

The forex signal trading is also dangerous due to false signals (no forex signal system on the market does not give 100% efficiency). Often, having an open long position in any currency pair of the market can go back quite strongly. Leverage the large (and often too large position) means that cannot withstand the voltage and the position is closed at a loss.

It is also important to understand what is happening on the charts. For analyzing currency markets are not required sophisticated technical analysis tools. Often very effective is playing an important support and resistance levels and the elimination of Fibonacci. Puncture important support (resistance) often evokes strong movements in the market. Skillful entry in the position where the market is dispersed, so after a valid signal, can reduce the risk of loss. Often, however, investor ‘interferes' and try to anticipate the important signals, or to hunt for the turning points in the market. The use of such a strategy, sooner or later leads to losses.