The global foreign exchange market moves over $5 trillion in daily trade volume. This daily volume makes Forex the most significant financial market worldwide. For this reason, all levels of foreign-exchange traders are attracted to Forex, from newbies to professionals. Trading Forex is made easy by low costs, access to leverage, and 24-hour sessions. As easy as it is to trade in Forex, it is just as easy to lose money.
Here are five ways to avoid losing money in Forex:
Do Your Due Diligence
As easy as it is to get into Forex, you must first do your homework before jumping in. Learning more about foreign exchange is vital for your success in the market. Most of the Forex learning is gained via live trading, and as a trader, you must learn everything there is to learn about Forex markets. Learning about the current economic and geopolitical factors that influence currencies is part of the due diligence.
This homework is a continuous effort as you must prepare to move with the evolving market regulations, world events, and conditions.Part to this due diligence involves coming up with a customized trading plan. This plan consists of having a systematic procedure for investment evaluation, risk determination, and coming up with the short term and long term objectives.
Find A Reputable Broker
You might be unfortunate enough to end up with a non-reputable broker. Since you cannot be sure how safe your deposits are, or the broker’s integrity, you should open an account with a reputable brokerage firm. This brokerage firm should be a member of the Australian Securities and Investment Commission (ASIC)
The local Australian regulator, ASIC ( Australian Securities and Investments Commission) keeps a firm reign over financial services. The regulator raised the brokers’ minimum net capital requirement from AUD 50,000 to AUD 500,000 to make sure brokerage firms are equipped to protect their investors from unfavorable events.
As a trader, you must research about the brokers’ account offering, which includes commissions, leverage amounts, initial deposits, withdrawal policies, commissions and spreads, and account funding.
Use a Demo Account
Almost all online trading platforms have a demo account, also called a practice or demo account. You can use the simulated account to place simulated trades without having an account. This account allows a trader to become more fluid at order-entry capability.
You can easily make a massive blunder in your trading account by pressing the wrong button. If you make many errors in order entry, you might end up with significant losses. Practicing with the simulated account makes you much more adept at making order-entry before you can trade with actual money.
Once you are through with your due diligence, practiced with a simulated account and you have a trading strategy in place, you are ready to go live. Going live means trading with real funds, and no matter how much you have practiced, nothing beats going live with real money. Start small. Before you start trading live, you cannot fully understand the difference between the expected trade price and the actual trade price.
A trading strategy that seemed foolproof might fail in a live market. Starting small allows you to evaluate your trading strategy and emotions. You become more experienced in the execution of accurate order entries, and avoid risking your trading account.
Have a trading journal that keeps track of your Forex transactions. Keep a record of all trading with date, profits, losses, instruments and your performance as a trader. When you periodically review the journal, you will get valuable feedback which acts as part of the learning curve.
Without keeping a journal, you are bound to make the same mistakes, which minimizes your chances of becoming successful.
Trading Forex is a lucrative venture, but only if you are dedicated and patient. Forex is not a get rich scheme, which means you have to have the patience and some spare capital to invest. As with any venture, you have to be vigilant and do your due diligence, especially when it comes to choosing a brokerage firm.