Do you want to avoid losing money as a forex trader? These days’ people venture into forex trading intending to make money, but yet instead they lose money and some even their life savings. The forex market s the largest financial market in the globe, trading nothing less than 5 trillion dollars daily and as such one can make good money from the market provided you know your way around it. Most forex traders lose money because of the lack of knowledge about the market. Before you dive into forex trading, there are specific majors you need to take so as not to lose money. Do some research about the market, the dos and don’ts of the market before you start trading. In this post, we are going to take a look at what majors you should consider so as not to lose money as a forex trader.
1 -look for a reliable broker
For you to avoid losing money as a forex trader, first and foremost you should look for an honest forex broker. It is possible for you to end up doing business with a less than reliable broker since the forex industry as little oversight compares to other financial sectors. As a result, there are many brokers who are unreliable. It is advisable that when you want to register with a broker, you should look for one that is a member of the National Futures Association (NFA). If it is a US broker, then it should be registered with the US commodity futures trading commission (CFTC). If if you want to register with a broker outside the US, then surely the broker is registered with that country’s regulatory body which brokers should be registered.
As a new trader, you should carry out some research to know of the kinds of offerings that come with each broker’s account. Things you should look out for include the leverage amounts, the commission and spreads that comes with the account, what is the initial deposits. Also, importantly, the funding of the account and withdrawal options and the policies that are associated with the account. You can get all this information from the broker’s customer care.
2- start with a demo account
Almost all the brokers in the market offer a demo account which can be used by new traders to practice how to trade to familiarize themselves with the trading platform and to get useful ideas on how to trade. With this kind of account, you don’t have to fund the account with your own money.
The brokers know that as a new forex trader, you are entirely a dummy when it comes to trading and so they offer this account to assist you in understanding the platform and the market. To avoid losing money as a forex trader, take advantage of this account, practice with a demo account for at least six months or even a year before you use the real account.
3 -don’t use too many technical tools
Most brokers trading platforms come with different types of technical analysis tools (indicators) which you can use for free once you open a trading account with them. One mistake new traders do is to use numerous indicators at once. If you want to stop losing money as a forex trader, then you should avoid using more than two trading indicators while carrying out your analysis. Using too many trading indicators at once can cause redundancy and give different and opposing signals.
Remove from the chart any analysis technique that s use often to improve trading performance.
4- safe guide your account
The main aim of trading forex is to make money, which is what every trader is interested. But it is also vital for you to know how to prevent losing money. To stop losing money as a forex trader, try and have an excellent money management method, and it will determine whether you are a successful trader or not. It is a common conception in the forex market that you can enter a trade position at any given price, and you will still make money from that trade. What is important is how you get out that trade to maximize your profit or minimize your loss.
As someone who wants to be successful in trading forex, you should know when to accept the loss and move on. Ensure you use a protective stop loss which will protect your existing profits or disrupt further losses utilizing stop-loss order or limit order. This method ensures that your loss remains reasonable. You can also try to set a maximum daily loss amount, and once this amount reached, all positions will close with no further trading for the day. You shouldn’t just have plans to minimize your losses, also put in place an excellent strategy to help you to protect your gains in the market. You should try the trading stops technique, and it can help protect your profit while giving trade enough room to grow.
5 -trade with a little amount
Okey you have spent time practising trading with a demo account, you have an excellent trading plan and feels it is time for you to go live ( trading using a real account with your own real money). To stop losing money as a forex trader, It is advisable that as a new trader, you start with little money, preferably the minimum deposit and stake little on a trade. This because no matter how much time you spend trading on a demo account and the level of experience you gain from it, it will never equate a real trading account.
You may be surprised that a trading plan you used to make a profit with a demo account might cause you to lose money with a real account. Also, emotional factors come into play when you are trading with a real account. When you start trading with a small amount, it allows you to analyze your trading plan and your emotions as well. It will help reduce potential loss and increase profit without having to risk your entire trading account balance.
6 -be reasonable with your leverage
One unique property of fore trading is the amount of leverage that traders get. The forex world provides traders with the opportunity to make a huge profit by investing little capital. Which is one of the reasons why the forex market is attractive to traders? A good trader can use the leverage to boost his account balance, but with a bad trader, leverage can quickly increase loss.
A good trader should know how to control the amount of leverage in his account by basing position size on the account balance.
As a trader, you need to have a journal to record all your trades. Your journal will help you to know both your loss and gain. You can evaluate your performance with the help of your journal.
8 -forex trading is a business
One significant point to point out to you is that forex trading is a business; hence, you should treat it as such. to avoid losing money as a forex trader, you need to have it in mind that momentarily losses and gains don’t matter in the short run. The most important thing is the performance of your trading business in the long term. So always try not to get too emotional about your wins or losses. As with other businesses, you can’t become successful with forex trade overnight. It takes time, effort, money and patience to ensure it becomes successful in the long run.
These are some of the tips to follow to avoid losing money as a forex trader. Follow these instructions, and you could become a successful forex trader in the long run and be making living trading forex.