Tips on How to Avoid Losing Money When Trading Forex

With the forex market gathering more popularity among retail traders and investors & the daily turnover volume going up $7.2 trillion per day and with 95% of all trade positions coming from retail trader, novice traders need to learn how to properly 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/traders 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 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 example, on this website there a total of 100 learn forex lessons that traders should learn so as to understand & grasp all the basic concepts & also advanced concepts that will explain to them what forex trading is all about & the various trading strategies used to trade currencies and also lessons which illustrate to traders how to manage their trading account balance. Trader also learn about leverage, margin and how these two are used in trade & how leverage can increase profits as well losses & also what margin is & 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 online broker.

After learning all the forex guides, traders should create a plan which will place the rules which they will adhere to when trading currencies. This plan will summarize all what they have learned & will be used as the course that one will use when trading the online forex market.

Practice Forex Trading on a demo practice account

The next thing that a forex 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 practice demo account. The practice demo account is where a trader can learn how to place trade transactions & trade the forex market but only that they will be trading on a demo practice account with virtual money.

The demo account is similar to the live account and the environment is the same as when a forex trader is transacting and trading the live market using real funds, 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 fx 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-out trade positions.

Trader can also test any strategy or any automated Expert Advisors(EAs) before they make a decision if their strategy is profitable enough to start and begin trading with it in forex market.

Use a Plan & Stick to the Trading Plan

Traders should always use the forex plan they develop to trade the online forex market. The trading strategy that a trader selects should be well written in this plan & trader should always follow the trading rules of this plan when making a decision when to open & close trades.

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

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

Keep a Journal To Track Your Trading Results

As a trader always keep a journal & write-down all trade transactions which you open in this trading journal, write down why you opened each trade, when you closed the trade and also the amount of profit/loss generated from that trade position.

After a while you as a trader 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 as a trader can then try & do more of what makes you successful & less of what is 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 trading journal from now & again that way then you give yourself a chance to spot the mistakes you make when trading by reviewing your trading journal.

Choose a Reputable Forex Broker Before Open your Account

Before you open a account with any Forex broker do some research and find a reliable forex broker which you as a trader can do biz with.

Choosing/Selecting 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 as a trader 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 Trading Account When You Have Enough Capital To trade With

Trade just like in any other business requires that the traders open a trading account when they have a good enough amount of capital to trade with.

FX requires that one starts trading with at-least $1,000 if they'll be micro lots and a minimum account balance of $100,000 if they'll be standard lots/contracts. If as a trader you don't have the required capital it's best to save until the moment you'll reach the amount of money which 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 Equity Management Guidelines To Protect Your Trading 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 and appropriate money management guidelines and methods & follow these rules when trading the forex market.

Money management rules will ensure that you'll protect the money on your account and that you'll have a chance of trading successful. To be profitable & successfully in the long-run a fx trader has to implement proper & appropriate money management guidelines & techniques 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 due to 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 transaction. By using money management rules traders will learn how to use leverage & know the best leverage ratio to use when trading based on the account balance they have in their account.

Because leverage increases both the profits and also the losses, traders must develop 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 trading strategies trader can improve their chance of being more successful & profitable when trading the forex market.

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Tips on How to Avoid Losing Money When Trading Forex