In this article, we will mention some of the most basic and useful tips for forex trading, so traders should gain the maximum possible profits while at the same time minimize their losses.
Trade only what you can afford to lose
It’s quite common for traders, especially when things are not going as planned and once they realize losses, to keep adding funds to their trading account. They keep feeding their losses and adding more and more funds to positions having losses. Traders should protect their investment capital and not fall into a trap adding money to a black hole. Set a specific amount for trading capital and use only this.
Having a solid trading strategy
As a result of having a specific amount of money to invest, traders should have a trading plan depending on their capital amount. The trading strategy should be previously tested, so traders should have solid trading data in terms of positions (open/close time, duration of trades), lots (trades size and volume), profits, and losses. Back testing is important and it’s preferable to be done using real trading conditions. The key is to stick to the plan and know when to enter the market and when to get out (exit strategy).
Always trade using a Stop Loss
A part of a trader’s trading strategy should be its risk management. The risk management will identify the level of risk and once breaking down the risk plan to each position, a trader should be able to calculate the exact amount of money or the capital’s percentage which will be the exposure. Stop Loss levels are extremely useful when there are spikes in the market prices and sudden movements usually during the announcement of important financial and economic news. The market can start heading in the opposite direction a trader selected and placing Stop Loss limits is an easy and safe way to stop trade(s) with losses.
Take profits
Using a similar mentality with stop loss levels, traders can either place Take profit limits or as per their risk plan to take profits from profitable trades. A position will not remain profitable forever. The market has its ups and downs, so prices move upwards and then downwards for some time. Traders should not be afraid to take profits and cash out winning traders. A very common practice is to close partially winning trades following the price trend as much as possible.
Be reasonable and know your limits
Traders should think and act logically excluding as much as possible emotions and sudden decisions from their trading plans. An unsuccessful trade is not the end of the world, but many continuous losing positions, may be a sign to reevaluate the initial trading strategy. Risk management will indicate the amount of money a trader is willing to lose per trade, per day, per week, etc, while at the same time there should always be an exit plan. Exit plan does not always followed with profits and winnings. A reasonable trader knows when to stop, even having a part of his initial capital lost.
Select a forex broker which is suitable for your needs
There are many forex brokers out there. Others are regulated and apply strict procedures; others are unregulated but also have specific policies and terms and conditions to be followed. Some brokers offer trading account types with low leverage, while others offer up to 1:2000! You can find useful information which will assist you to select the best forex broker that suits your needs here: How to choose the best Forex broker and CFD provider. It is also useful to be aware of the available services and payment methods a forex broker offers to its clients. More information can be found here: Forex brokers - Payment methods - Deposits and withdrawals
Traders’ main goal should be to have winnings, but at the same time to protect their trading capital. Everyone is happy when positions are green and profitable, but for sure there will also be some red and losing trades. Saving enough money by cutting losses when stopping losing trades at the correct time is equal to having a winning trade.
The forex market is a volatile market where continuous education and training is necessary and important. Traders should be able to understand all the underlying facts, from politics and news to economic reports and all fundamental information which may affect the market. Gathering and evaluating all information which can affect the market may get traders ahead of the game and place them in an advantageous position.
