It is no brainer that many first time investors see forex trading a quick way to be rich. There are no short of articles over Internet that even claim so. Forex trading can prove to be difficult and the path is no short of obstacles and may cause huge loss and potential penury.
In forex trading you can lower your risk by keeping few points in mind.
Be careful with the leverage: Though Forex trading provides higher leverage than others. This comes at a greater risk of losing more money than usual. In foreign exchange market, the leverage can be 100:1. It means you can trade up to 100,000 $ on your 1000$ deposit. Sounds great isn’t it?It is not because if there is a loss then the loss margin will be much higher if traded with high leverage.
Learn about basic Forex trading:- When there is money involved, it is always advisable to do your re-search before putting your money. Same goes for Forex trading too, buying and selling currencies doesn’t always mean Forex trading. You have to familiarize with terms such as pips, spreads, swaps, Leverage, lot or volume sizing, trading software etc. You have to constantly learn about strategies on forex signals that will minimize the risk and will improve your market analyzing skill.
Choose a compatible trading style: Choose a trading style that will suit best to your need. Depending upon your requirement, the main two are day traders and position traders, in day trading you will pick investment on the start of the day. The trading will work upon the bias and in the end of the day finish it either by making profit or loss. In Position trading trades last longer, it can last for weeks, months or years. This type of tradingrequires great market research essential for this type of trading.
Planned Risk Management: A trader is considered good if he/she is very good at managing their capital. Taking calculated risk is essential unless you have very deep pockets or you are an unusually skilled trader. Not following a disciplined risk management method in trading may cause huge loss to any trader. Many experts emphasize on this one single point, as it has been the quintessential element for trading.
Choosing your Broker:-Beginners may overlook this, with many brokers in the market many choose the one recommended by family members, friends or colleagues. Though not necessarily you have to stick with the recommendation, choose your broker based on offers that meets your trading style and expertise. There are brokers who have higher spreads, higher swaps rates and other trade restrictions that could make your trading costlier.A good broker with a poor platform, or a good platform with a poor broker, can be a problem. Cmtrading, which offers MT4 platform for trading will be good choice.
Be Real and control your Emotions:-In trading, be psychologically prepared for loss. It is a two way journey hence do not make assumptions that every trading that you do will be profitable. Be prepared for loss, in fact if you lose money at first you will gain experience about what works and what does not for you. It is always advisable to take low risk at first. Likewise, when you make profit do not just go ahead and invest all what you got but invest your profit. In that way you will keep your capital safe, successful trading may be associated with making profit however saving your capital is what it counts.