5 tips to reduce your forex worries
Posted on 5th Dec 2017
Forex trading isn't for the faint-hearted and demands all your attention and aptitude. For forex investors the biggest worry is if they happen to start losing trading capital by being stuck in bad trades. No guarantees can be expected in Forex trading where the trend always changes and the signal to sell or buy is elusive. All successful traders include sound money management techniques in their strategy to mitigate risks and protect their portfolio from market jolts. So, what should an investor do? Here are 5 tips to allay your anxieties so that you can focus on being a better investor.
- Don't trade beyond your expertise level: Once a trader has done his study and research, has a trading strategy and has practised long enough with a trial account he is ready to make the transition to live markets. However, it is vital to begin small, be slow and steady when starting off. Factors like emotions and slippage can be assessed only when applied to real-time trading. A trading plan that fared well in practice trading could misfire in a live market situation. By starting small a trader can understand the efficacy of his trading approach instead of risking his entire account at one go.
- Avoid using excessive leverage: One of the factors why forex trading is attractive to millions of traders worldwide is because of the use of leverage. Most online brokers offer clients with leverage ratios of up to 500:1. However, leverage is a two-edged sword and can amplify your losses as well as gains. Leverage should only be used while considering your potential losses in mind. That way your portfolio will not suffer overwhelming losses in case you have a series of bad trades as all investors do from time to time.
- Only trade with a well-reputed brokerage firm: The forex industry is replete with scams and frauds. Under such circumstances and pressing concerns like the security of your funds, the reputation of your broker it is crucial for you to register under a trusted brokerage house following regulatory oversight. Every country has its own respective regulatory body with which legitimate forex brokers should be registered.
- Do your study and research: Just because anyone can trade forex online nowadays does not imply that it's a cakewalk. It is indispensable to educate yourself about currency trading in order to be successful as a forex trader. While the best way to learn is through trading in real-time market conditions, traders should try to learn as much as possible about the forex markets including the political and economic factors that affect currency valuations. Traders should always be aware of market volatility, regulations and the latest happenings in order to stay on top of their trades. Learning to trade should be an ongoing process in order to evolve as a better trader.
- Protect your account: While there is focus on earning money in forex trading it is also important to limit losses and avoid hurting your portfolio. Trading forex without checks is like jumping out of a plane without a parachute. Proper risk management is integral to successful forex trading. It's not enough to get into a trade and make profits, you should also know your exit points in order to minimise losses. Traders should use stop losses to protect their portfolio and safeguard gains by using trailing stops.
- Concluding summary: Whether you are an average trader looking to lower your risk or an adventurous one eager to take advantage of currency fluctuation, a greenhorn or a tenured trader it is always necessary to trade objectively using well-devised risk management methods for trading success in the long run. Today's global investor has more exposure to currencies than ever before due to leverage, round-the-clock trading sessions, low costs. Incurring profit or loss is part and parcel of Forex Trading but the attitude to take both in your stride differentiates the expert from the amateur.
