The popularity of forex attracts foreign-exchange traders of all levels, from newbies who are just learning about the market to well-prepared experts.
Despite how natural it is to trade forex with non-stop sessions, critical leverage, and generally low costs, it is also extremely simple to lose money doing so. In the highly competitive and risky forex market, there are seven different ways for traders to avoid losing money.
Find a reputable broker
The forex market, unlike many other financial markets, is relevant to far less regulation. As a result, you may find yourself dealing with a shady forex broker.
Before you fully enter the forex market, make sure you’re working with a Forex broker you can trust, as a broker’s overall integrity is important to the safety of your funds and your chances of achieving success in the forex market.
Able to check whether or not the broker you’re thinking is registered is a good place to start. Each country has its own regulatory body, which reputable and legal brokers must register with. If you’re doing business in the UK, make sure you’re dealing with FCA forex brokers.
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Keep your charts clean
Once you open an account as a trader, it may be tempting to use every technical analysis tool available on the trading platform. However, even though many of these indicators are best suited to the forex industry, it is still important for traders to keep analysis techniques to a minimum so that the techniques can eventually be effective.
For example, traders use very multiples of the same type of indicator, such as two oscillators or two volatility indicators. It’s worth noting that when you combine multiple indicators like these, they become redundant, which can result in contradictory signals.
Protect your trading account
While everyone’s goal in the forex market is to make money, it’s also important to learn and understand how to avoid losing money. Money management is an important part of any successful trade, and many forex experts agree that you can enter a position at any price and still profit.
It’s not always about how you enter a trade; it’s more about how you exit it. Consider when it’s acceptable for you to move on from a challenge.
Using a protective stop loss, which is an important step in ensuring that your losses remain minimal and reasonable, is a good practice to consider. You could also set a daily loss limit, after which no new trades will be opened and all open positions will be closed until the next trading session.
Use a practice account
Some may argue that a demo account is unnecessary. However, if you truly want to improve your level of alertness and completely remove the risk of losing money in forex, you should actually learn with a demo account.
Mostly every forex trading platform provides a practice account, also known as a demo account or simulated account. The catch is that you can only trade falsely with a zero-fund account. One of the most valuable advantages of a simulated account is that it allows you to practice order-entry techniques. Nothing can harm a trading account more than pressing the wrong button when entering or exiting a forex position. Regrettably, such occurrences are not uncommon. For example, it is not uncommon for a novice trader to unintentionally add to a losing position rather than exiting it. A learning account will prepare you for situations like these. There are other tools that can be used to keep track of foreign trading events, such as dailybluepips.com
When going live, start small
It may be time to go live, that is, enter trades with real money, once you’ve fully equipped yourself with all of the above tips. It is important to note, however, that no amount of demo trading can accurately simulate real-time trading. As a result, it is important for a forex trader to start small when trading live.
Treat forex Trading as a Business
Traders must keep in mind that forex is a business. Traders, like any other business, will experience losses and profits. As a result, it is critical not to regard a loss as a major setback. Take it as a bad day at work and stay focused on the long-term results instead.
Keep a Trading Journal
When you engage in forex trading, regardless of where you are, and if you are profitable, you will be taxed by your government. If you are confused with how the government taxes forex traders, you may be surprised to learn how much money you can lose in taxes. As a result, you must become knowledgeable with your country’s tax laws.
THE BOTTOM LINE
Trading is a difficult task. Something that has the potential to be profitable will always be difficult at best, and you will be put to the test on the market. In this game, even hard work will not suffice.
However, if you follow some of the advice given and give it your all, there’s no reason why you won’t be able to turn it into a lucrative career.