Top Foreign Exchange Trading Safety Tips
The forex market is not without risk, but you have to understand how you can limit the risk you face. There are a number of ways that you can do this and you should know about as many as possible. When you know these tips you can implement them and start trading forex safely.
Controlling Greedy Foreign Exchange Trading
Emotional trades are one of the most common traps that forex traders fall into. You should never continue foreign exchange trading when you feel certain emotions. Of course, you cannot shut down your emotions, but you can learn to control them. You can easily control greed by putting a few safety measures in place.
You should never try creating a trade based on conditions that do not exist. You should never gamble with trading as all trades must be based on facts. Do not push up your profit targets without placing stop orders that can limit your losses. You should also learn to cut off losing trades and not wait for them to turn into winning trades.
Overtrading is something that traders can easily do and this often leads to losses. Completing too many trades in a single day is one way of overtrading. Another is trading for prolonged period of time. When you complete a lot of trades in a single day you may have too many positions open. This could lead to you losing control of all your trades and not being able to close them when they make a profit.
As you are human you need to rest and trading for prolonged periods of time is tiring for the body and mind. Setting a trading schedule is the best way to avoid this and you should take a break during your trading.
Low Risk and Appropriate Leverage
Trading with low risk is the only way that you can ensure your account balance does not sharply drop. You should only risk around 5% of your account balance and many traders say you should stock to 1%. With these percentages if you run into a 20 trade losing streak you only lose 20% of your trading account. You should also be careful about the amount of leverage you use. The percentage of your account that you are risking must include the leverage you are using. This means that the 5% of your account is everything you could lose with the trade, not 5% plus the leveraged amount.
High Speed Internet
Most traders do not consider their equipment when they start trading. You need to have a reliable computer and a fast, reliable internet connection. The faster the internet the faster you get information and your trades are sent to the broker. Any delay in information could be the difference between a winning and a losing trade.
Closing Open Trade
Before an economic new release you should close all the open trades you have which could be affected by the release. This is any trade with the currency in the pair. Closing the trade ensures that you do not lose should the trend swing against you after the news release.
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