Trading Forex is trading in risk. This is a highly volatile market. Currencies move far more often and far more unpredictably than stocks and shares. You have to be prepared to lose money. And that’s important for the novice trader.
If you’re scared of losing, you will lose. Fear paralyses the mind and prevents the taking of calculated risks.
In this article, we will discuss how to make trading Forex successfully easier.
There are a number of ways you can unexpectedly lose money. That’s the nature of the beast. Consider them with every trade you make.
Some of the worst offenders are:
- Corrections in the currency exchange rates.
- Volatile markets and wild variations in prices.
- Delayed payment confirmations.
Some of these are to do with the system, whereas others are market forces you can’t control. What you need to remember is that delays of even a few seconds can ruin your trade.
Profit Targets and Market Exits
Profit targets are an essential tool you need to use. It’s the definition of iForex trading made easy. You can automate your entry points, but you can also automate your exit points. These are known as limit or profit-take orders.
Once you put your profit-take order down, the system will automatically leave the market when it hits your profit level.
This enables you to leave the computer. You don’t have to constantly monitor the market.
Another valuable tool available to you is loss capping. Stop loss orders predetermine your exit point should something go wrong.
Let’s say that you’ve fallen short with one of your currency pairs. A stop loss order can be placed above the market price. If you’re long, place it below the market price.
These tools help to manage risk without direct intervention. In a way, they’re like seatbelts. You never want them to come into use, but when they do they can prevent catastrophe. Not placing stop loss orders usually means potentially huge losses.
Technical Analysis and Fundamental Analysis
Any good trader knows that you need both to succeed. You have to take into account the goings on in the world and the goings on in the market. Both of them work together.
Most traders have tools that help them to monitor both arenas.
For technical analysis, there are literally thousands of different tools. The chances are your trading platform will recommend technical analysis tools. If you’re a beginner, you don’t need all the metrics for now. They will only serve to confuse you, and many of them are quite pointless.
Fundamental analysis is harder to track. There’s debate and division over what tools work best.
Some people stick to using good old Google News for tracking the likes of BBC and CNN. Others prefer to go to these sites directly, or use Google Alerts.
This is a matter of choice. The fact is something won’t be going on all day. It’s best to stick to checking your fundamental analysis 2-3 times a day, for full-time traders.
Losing and Winning Positions
Adding to winning or losing positions is generally a strategy for the advanced trader. It’s so easy to get carried away by doing this.
Generally, it’s easier to simply stick with what you originally placed on the currency pair. The reason for this is even winning positions can quickly turn without warning. The market is too volatile.
Never place any money on losing positions, though. This is just like hedging your bets and you’ll nearly always lose more money. Losing positions are losing for a reason. You can’t play the long game effectively with Forex.
We’ve discussed some of the automatic trades you should always have in place. Just because we have this technology doesn’t mean we should become reliant on it.
There’s always a danger of trading our own intuition for the values of a computer. You should always be the one to make the trade. The computer is not in control.
Always place your stop loss orders. This is your automatic trade, but make sure you have some input. Even though you can leave the computer doesn’t mean to say you should all the time.
Manual trading keeps you in control and prevents you from becoming lethargic in your habits. Relying on someone or something else to trade for you is a risky path to go down.
Personal Stop Loss
Stop loss orders only stop you from losing more than a certain amount on individual trades. You have to set your own loss capping for your budget.
The best way to do this is to write down your limits every day. Never go over these loss limits no matter how good the trade appears to be. This way you won’t lose thousands of dollars in one day of mad trading.
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