Tips on How to Avoid Losing Money When Trading Forex
With the forex market gaining more popularity among retail traders and investors & the daily turnover volume going up $7.2 trillion per day and with 95% of all trade transactions coming from retail trader, beginners need to learn how to correctly setup their trading investment activity so as to avoid losing money when trading Forex.
The FX is a 24 hour market open for five and half days every week, a market that provides easy access to leverage & very low transaction costs in trading the Market: this makes this market easily accessible to retail traders and investors & also the fact that this is the largest and most liquid financial market means that even more and more traders continue to be attracted to start trading and investing in this financial market.
The following tips should guide beginners on what to do before starting to trade currencies online and before they invest their money in the currency exchange market.
Take Time to Learn Forex Before Investing in Forex
The first thing which every trader should do is to take time & learn about the online forex market before they decide to invest their money in this online trading market. For examples, on this website there a total of 100 learn forex lessons that traders should learn so as to understand & grasp all the basic concepts as well as advanced concepts that will explain to them what forex trading is all about & the various strategies used to trade currencies as well as topics which explain to traders how to manage their account balance. Trader also learn about leverage, margin and how these two are used in trading & how leverage can increase profits as well losses & also what margin is and how this margin is calculated and why traders need to maintain enough capital in their account when trading on margin using leverage provided by their broker.
After learning all the forex tutorials, traders should create a plan which will place the rules that they will follow when trading currencies. This plan will summarize all what they have learnt & will be used as the course that one will use when trading the online forex market.
Practice Forex Trading on a Practice Demo Account
The next thing that a trader should do before they invest their money in the online currency exchange market is to practice what they have learned and test their plan on a demo practice account. The practice practice account is where a trader can learn how to place trades & trade the forex market but only that they will be trading on a demo account with virtual funds.
The demo trading account is similar to the live account and the environment is the same as when a trader is trading the real market using real money, only difference is that the money being traded with on a demo account is virtual currency and there is no risk of losing money when trading on a practice demo account.
The softwares of most brokers will provide option of opening a practice trading account, a trader can use this demo account to learn about the forex platform. The trader will also use this demo account to learn how to trade currencies using the various orders types provided and learn how to close trade transactions.
Trader can also test any strategy or any automated Expert Advisors before they decide if their strategy is profitable enough to start trading with it in forex market.
Use a Trading Plan & Stick to the Trading Plan
Traders should always use the forex plan they develop to trade the online currency market. The strategy that a trader chooses should be well written in this plan & trader should always follow the rules of this plan when deciding when to open & close trades.
If as a trader your chosen strategy is to use automated strategies & Expert Advisors then these automated strategy should be specified in your plan. Whatever trading strategy you decide to use as a trader, write it down in your plan and stick to trading with that strategy.
Traders should also avoid emotions of fear & greed when trading in market. The fx plan will help trader plan their trades & this way traders will not make trades based on their emotions. A plan will help a trader set clear goals when trading and at same time will help traders to stay organized when trading & thus ensuring the traders become more successful when trading in fx market.
Keep a Journal To Track Your Trading Results
As a trader always keep a journal & writedown all trades which you open in this journal, write-down why you opened each trade, when you closed the trade and also the amount of profit or loss generated from that trade.
After a while you can then review the trades you've made try & look at why the losing trades made a loss & why the winning trades were successful and after that you can then try and do more of what makes you successful & less of what's making you to open losing trades and that way keep on improving on your strategy.
As a trader if you do not keep a trading journal you may continue making same mistakes over & over again without even knowing it, but if you keep a trading journal and you keep reviewing this journal from time to time then you give yourself a chance to identify these mistakes you make when trading from reviewing your journal.
Choose a Reputable Forex Broker Before Open your Account
Before you open a trading account with any Forex broker do some research and find a reliable forex broker which you can do biz with.
Choosing a good forex broker will give you a chance at making profits from your online trading activity. Choosing a broker that is regulated is the best advice that you can get. Regulated forex brokers follow regulation rules set by their regulators & this means that these forex brokers are the best to choose from when opening an account as they are the most reliable because they are licensed and regulated which means that they are legitimate.
Open Account When You Have Enough Capital To trade With
Trade just like any other business requires that traders open an account when they have a good enough amount of capital to trade with.
Forex requires that a trader starts trading with at-least $1,000 if they will be micro lots & a minimum account balance of $100,000 if they will be standard lots. If as a trader you do not have the required capital it is best to save until the time you will reach the amount of money that will help you to open a well capitalized forex account. This will increase your chances of becoming success in trading currencies in the forex market.
Use Proper Money Management Rules To Protect Your Account
As a trader you will need to protect you account balance when trading if you want to trade fx profitably for a long time. The best way to protect your trading account is to learn about the proper money management rules & follow these rules when trading the forex market.
Money management rules will ensure that you will protect the money in your account & that you will have a chance of trading successful. To be profitable & successfully in long run a trader has to implement proper money management rules when trading. Money management rules that a trader will follow should be specified within their plan.
Money management rules will help a trader to minimize their losses & essentially help trader learn how to protect the profits that they make in the forex market using different strategies specified by the money management rules. Traders can learn about money management from the learn forex lessons section of this site.
Money management will also help trader know what amount of leverage is best to use when placing trades. Leverage gives a trader a good opportunity to earn profits from the borrowed capital. Trade is very popular because of the fact that forex traders using leverage can use little of their investment capital and borrow the rest of the money to make a trade. By using money management rules traders will learn how to use leverage & know the best leverage to use when trading based on the account balance they have in their trading account.
Because leverage increases both profits as well as losses, traders must come up with rules on how best to use this leverage when trading. By learning money management rules used in Forex traders will know how to decide what amount is best to use when trading forex using their strategy.
Summary
Traders should try and use the above approach so as to avoid losing money when trading forex. Following the above strategies trader can improve their chance of being more successful & profitable when trading the forex market.
