Forex Trading Tips
Many traders try different trading strategies with one goal in their mind. Finding a way for profitable trades. However, no one can have continuous profitable trades. Therefore, another important part should be how to minimize losses and stay in the game. Profits and losses will inevitably occur one after the other.
In this article, we will mention some of the most basic and useful tips for forex trading. By explaining these, traders should gain the maximum possible profits while at the same time minimize their losses.
Trade only what you can afford to lose
It’s quite common for traders to keep adding funds to their trading account. This can happen, especially when things are not going exactly as planned and once they realize losses. They keep feeding their losses and adding more and more funds to positions having losses. Traders should protect their investment capital and not fall into a trap adding money to a black hole. Set a specific amount for trading capital and use only this.
Having a solid trading strategy
Traders should have a specific trading plan to implement, depending the available capital amount. Testing the trading strategy in advance is imperative. Traders should have solid trading data. This can be open/close time, duration of trades, lots (trades size and volume), profits, and losses. Back testing is important and it’s preferable under real trading conditions. The key is to stick to the plan and have a solid get out plan (exit strategy).
Always trade using a Stop Loss
A part of a trader’s trading strategy should be its risk management. The risk management will identify the level of risk by breaking down the risk plan. A trader should be able to calculate the exact amount or the capital’s percentage which will be the risk exposure. Stop Loss levels are extremely useful, especially when there are spikes in the market prices and sudden movements. This can happen during the announcement of important financial and economic news. If trades start moving at the opposite direction, placing Stop Loss limits is a safe way to minimize losses.
Take profits
Similar to Stop Loss levels, traders can place Take Profit limits as part of their risk and trading strategy/plan. A position will not remain profitable forever. The market has its ups and downs, so prices move upwards and then downwards for some time. Traders should not be afraid to take profits and cash out winning traders. A very common practice is to close partially winning trades following the price trend as much as possible.
Be reasonable and know your limits
Traders should think and act logically excluding as much as possible emotions and sudden decisions from their trading plans. An unsuccessful trade is not the end of the world. On the other hand though, many continuous losing positions, may be a sign to reevaluate the initial trading strategy. Risk management will indicate the amount of money a trader is willing to lose. Traders can calculate losses per trade, per day, per week, etc. At the same time there should always be an exit strategy plan. Exit plan does not always followed with profits and winnings. A reasonable trader knows when to stop, even having lost a part of his capital.
Select a forex broker which is suitable for your needs
Regulated and unregulated forex brokers are numerous at the global finTech industry. Some brokers offer trading account types with low leverage, while others offer up to 1:2000! How to select the best forex broker guide is here: How to choose the best Forex broker and CFD provider. The available services and payment methods a forex broker offers can be found here: Forex brokers – Payment methods – Deposits and withdrawals.
Traders’ main goal should be to have winnings, but at the same time to protect their trading capital. Everyone is happy when positions are green and profitable. For sure though, there will also be some red ones and losing trades. Cutting losses when stopping losing trades at the correct time, is equal to having a winning trade.
The forex market is a volatile market where continuous education and training is necessary and important. Traders should be able to understand all the underlying facts. From politics and news to economic reports and all fundamental information may affect the financial market. Gathering and evaluating all information which can affect the market may get traders ahead of the game. This way they can be in an advantageous position over other traders.
