10 Tips for trading the FOREX Market Part 3 (End)

Forex Trader


8. Avoid Using Excessive Leverage.
Many traders are seduced by the opportunity to trade on margin, also known as leveraged trading. When you trade with a small deposit initially, you can still open relatively large positions, so it is essential that you do not overdo it when selecting the size of your trade. Trading with a high degree of leverage, which is common in the foreign exchange markets, means that you provide just a small portion of the true amount you are investing while preserving profit/losses as though you had invested the full amount yourself. This can work in your favor, but can also go very wrong. You might sustain a loss that is equal to all of your initial investment, but you may also lose even more than you invested in your trading account. There are strategies of how to deal with losses, but these strategies also require a responsible trading strategy. Leverage can be a powerful tool that may be used to maximize profits, but it can also serve as your downfall. Do not take this lightly if you do not know how it works.
9. Manage Your Money.
Traders with experience tend to recommend risking a set percentage of your capital, and never skewing from that. This is very advantageous in times of losses because it reduces their impact. Many inexperienced traders tend to ignore this piece of advice and increase the percentage risked as the amount they are losing increases. This is irresponsible money management and will lead to more emotional trading and, inevitably, more losses. So set your limits both with your stop-loss and take-profit levels, as well as with the percent of your capital that you are willing to risk, and stick to the plan!
10. Practice On A Free Demo Account.
Unlike some other skills, like learning an instrument or a language, the forex market should not be approached on a trial and error basis. We are talking real money, your savings, and you need to be prepared and gain the necessary skills in order to be a successful trader. Luckily for you, many forex brokers offer practice versions of their trading platforms that can allow you to use play money while you learn the market and develop a strategy. With a free forex demo account, you can experiment and check how the market reacts to certain news events and other economic influences without risking your investment capital. But just because you are using play money does not mean you should not take this account seriously. if you want to truly learn from the experience, you need to take losses seriously, understand why they occurred, and take this opportunity to study and truly practice. Take advantage of this market training tool before you start trading your real money.
Now you can take all the tips on this list and practice them with your own free practice account. We recommend Markets.com. This broker offers a vast amount of free educational material, including videos and webinars. They have a social trading tool whereby you can follow the best performing traders and copy their trades and are fully compatible with the leading trading softwares such as MetaTrader4. You also get a nice welcome bonus when you sign up with them.


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