The global forex market does beyond $5 trillion in average daily trading volume, making it the biggest financial market in the world. It’s so easy to trade forex with access to major leverage, but it’s also very easy to lose money trading forex. Below are 10 ways you can Prevent Yourself From Being Added To The Statistics Of Loosing Traders
- Do Your Homework – Learn Before You Burn
Despite the fact that most forex education comes from live trading and experience, a trader must study everything possible about the forex markets, as well as the geopolitical and economic factors that affect a trader’s preferred currencies. Part of this research course of action involves developing a trading plan.
- Take the Time to Find a trustworthy Broker
As a result of concerns about the safety of deposits and the overall integrity of a broker, forex traders should only open an account with a firm that is a member of the National Futures Association (NFA) and that is registered with the U.S. Commodity Futures Trading Commission (CFTC) as a futures commission merchant. Each country outside of the US has its own regulatory body.
- Use a Practice Account
Nearly all trading platforms come with a demo account. These accounts allow traders to practice trades without a funded account. One good benefit of a practice account is that it allows a trader to become skilled at order-entry techniques.
- Keep Charts Clean
Any analysis technique that is not frequently used to develop trading performance should be removed from the chart. Other than the tools that are applied to the chart, observe the overall look of the workspace. The selected colors, fonts and types of price bars ought to create an “easy-to-read-and-interpret” chart, allowing the trader to more effectively react to changing market conditions.
- Guard Your Trading Account
Always using a protective stop loss is an effectual way to make sure that losses stay sensible. Traders can also try using a maximum daily loss amount beyond which all positions would be closed and no new trades opened until the next trading session. It’s okay for traders to have plans to check losses, it’s also critical to protect profits. Money management techniques can help preserve winnings while still giving a trading room to grow.
- Start Small When Going Live
Once you’ve done your homework and have a trading plan in place, it may be time to start trading with real money at stake. No amount of practice trading can simulate real trading. As such, it is very important to start small when going live.
- Use Reasonable Leverage
Correctly used, leverage does offer a potential for growth; however, leverage can just as easily increase losses. A trader can manage the amount of leverage used by basing position size on the account balance. While it’s possible for the trader to open a much larger position if he were to maximize leverage, a smaller position will limit risk.
- Keep Good Records
Keeping a record of your trading activity containing profits and losses, and perhaps, your performance and emotions can be beneficial to growing as a successful trader. When periodically reviewed, a trading journal provides significant feedback that makes learning possible.
- Understand Tax Implications and Treatment
Consulting with a qualified accountant could help avoid any surprises and can help individuals take advantage of different tax laws. Given that tax laws change often, it’s wise to grow a relationship with a trusted professional who can handle all tax-related matters.
- Treat Trading As a Business
It’s essential to think of forex trading as a business, and do not forget that individual wins and losses don’t matter in the short run; it is how the trading business performs over time that is important. Planning, setting practical goals, being organized and learning from your successes and failures will help ensure a long, successful career as a forex trader.
Summarily, traders can avoid losing money in forex by being prudent, having the patience to study and applying sound money management techniques as well as approaching trading activity as a business.