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Tips on How to Avoid Losing Money When Trading Forex

With the forex market gaining more popularity among retail traders and investors and the daily turnover trading 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 forex trading investment activity so as to avoid losing money when trading Forex.

The Forex is a 24 hour forex market open for five and half days every week, a market that provides easy access to leverage and very low transaction costs when it comes to trading the market; this makes this market easily accessible to retail traders and investors and 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 that every trader should do is to take time and learn about the online forex market before they decide to invest their money in this online market. For example, on this website there is 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 and the various trading strategies used to trade currencies as well as topics that explain to traders how to manage their account balance. Trader also learn about leverage, margin and how these two are used in trading and how leverage can increase trading profits as well trading losses and also what margin is and how this margin is calculated and why traders need to maintain enough capital in their trading account when trading on margin using leverage provided by their forex broker.

After learning all the forex lessons, traders should come up with a Forex trading plan that will set the rules that they will follow when trading currencies. This trading plan will summarize all what they have learnt and will be used as the trading guide that a trader will use when trading the online forex market.

Practice Forex Trading on a Demo Trading 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 forex trading plan on a demo practice account. The practice demo account is where a trader can learn how to place trades and trade the forex market but only that they will be trading on a practice account with virtual funds.

The demo account is similar to the real trading account and the trading environment is the same as when a trader is trading the real market using real money, the 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 demo account.

The Forex trading platforms of most brokers will provide the option of opening a demo account, a trader can use this demo account to learn about the forex trading platform. The trader will also use this demo account to learn how to trade currencies using the various forex orders types provided and learn how to close trades.

The trader can also test any trading strategy or any automated trading Expert Advisors before they decide if their strategy is profitable enough to start trading with it in the forex market.

Use a Forex Trading Plan and Stick to the Forex Trading Plan

Traders should always use the forex trading plan they come up with to trade the online currency market. The strategy that a trader chooses should be well written in this forex trading plan and the trader should always follow the rules of this forex trading plan when deciding when to open and close trades.

If as a trader your chosen strategy is to use automated trading strategies and Expert Advisors then these automated strategy should be specified in your trading plan. Whatever strategy you decide to trade with as a trader, write it down in your forex plan and stick to trading with that strategy.

Traders should also avoid emotions of fear and greed when trading in the forex market. The forex trading plan will help trader plan their trades and this way traders will not make trades based on their emotions. A Forex trading plan will help a trader set clear goals when trading and at the same time will help traders to stay organized when trading and thus ensuring the traders become more successful when trading in the forex market.

Keep a Forex Trading Journal To Track Your Trading Results

As a trader always keep a trading journal and write down all trades that you open in this journal, write 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 have made try and look at why the losing trades made a loss and why the winning trades were successful and after that you can then try and do more of what makes you successful and less of what is making you to open losing trades and that way keep on improving on your trading strategy.

As a trader if you do not keep a trading journal you might continue making the same mistakes over and over again without knowing, but if you keep a trading journal and keep reviewing this journal from time to time then you give yourself a chance to identify the mistakes you make in trading from reviewing your trading journal.

Choose a Reputable Forex Broker Before Open your Forex Account

Before you open an account with any Forex broker do some research and find a reliable forex broker that you can do business with.

Choosing a good forex broker will give you a chance at making profits from your 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 and 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 an Account When You Have Enough Capital To trade With

Forex trading just like any other business requires that traders open an account when they have enough capital to trade with.

Forex trading requires that a Forex trader starts trading with at least $1,000 if they will be trading micro lots and a minimum account balance of $100,000 if they will be trading standard lots. If as a currency 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 trading account. This will increase your chances of success when it comes to 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 forex profitably for a long time. The best way to protect your account is to learn about the proper money management rules and follow these rules when trading the forex market.

Money management rules will ensure that you will protect the money in your forex account and that you will have a chance of trading successful. To be profitable and trading successfully in the long run a trader has to implement proper money management rules when trading. The money management rules that a trader will follow should be specified within their forex trading plan.

Money management rules will help a trader to minimize their trading losses and essential help the 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 trading lessons section of this website.

Money management will also help trader know what amount of leverage is best to use when placing trades. Leverage gives trader a great opportunity to make profits from borrowed capital. Forex trading 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 and 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 trading strategy.

Summary

Forex 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 and profitable when trading the forex market.

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