The world’s foreign exchange markets are massive and volatile. The average daily forex volume dwarfs that of the New York Stock Exchange and other well-known equity exchanges, and the worldwide growth in enthusiasm for currency trading shows no sign of abating. While there’s never been a better time to dive into the tricky yet profitable waters of forex, it’s best to bringplenty of flotation gear for protection.
Like any other trading environment, forex has its fair share of risks. It would be foolish to try to minimise them. However, the risks that attend currency trading aren’t cause for undue alarm. Unlike some stocks, currencies always retain some value. What’s more, currency fluctuations often follow predictable if uneven patterns that provide savvy investors with profitable trading opportunities on a regular basis.
As you delve deeper into the world of forex, take a moment to familiarise yourself with some of the associated risks. This will require you to take a clear-eyed view of various trading risks and implement strategies that permit you to surpass them.
Prepare and Observe
Many novice forex traders are seduced by promises or insinuations of quick gains and “foolproof” trading strategies. Of course, every seasoned market participant knows that forex gurus make their own luck. If you’re lucky enough to make a great trade without much planning or foresight, don’t assume that this gives you a blank slate to trade blindly. In the long run, traders who don’t painstakingly prepare, test and refine their trading strategies tend to regret their approach.
Develop systems that you can measure and manage. If you’ve already been trading for some time, you probably have a preferred strategy that you use to find seemingly profitable trades and lock-in gains. If you don’t have such a plan, take the time to research successful strategies and use “educated trial and error” to test them out. If you already have a preferred strategy, use a program of objective back-testing to ensure that you’re realising adequate gains.
Objectivity Is Key
Even the most experienced forex traders can be overly emotional about their trading strategies or preferred currencies. Novices are even more vulnerable to emotional attachments to the wrong signals or denominations.
Emotion-based forex trading can take many different forms, and it’s advisable to avoid all of them. No matter how long you’ve been using it, a trading strategy that doesn’t hold up to objective back-testing simply isn’t in your best interest. Fortunately, top-notch trading platforms provide the tools that you need to check up on your strategies and change course before it’s too late.
Likewise, you shouldn’t stick with a currency pair that isn’t producing value. If a long-ago gain keeps you coming back to the same trade over and over, you’re probably not maximising your portfolio’s potential. Use objective analysis tools to find the current market environment’s most dynamic pairs and trade them on a rotating basis. As a corollary, be sure to perform your own research before entering a trade. If you pay too much attention to what “talking heads” or bloggers say, you’re liable to make some poor choices.
Don’t Be Afraid of Losses
No seasoned forex trader is perfect. Even the best strategies and most careful analyses can fall victim to unexpected developments or sheer chance. When you find yourself on the wrong end of a sour trade, it’s up to you to react properly. In most cases, you’ll need to admit that the trade has failed and sell out of your unprofitable position before your losses become any worse. More importantly, you’ll need to learn from what happened and use the knowledge to update your systems and strategies. If you’re willing to take small losses from time to time, you may avoid making larger errors of judgment.
Use a Quality Forex Partner
If you’re serious about increasing your chances to beat the risks associated with forex trading, you need a trusted trading platform that’s been proven to execute at a high level. Don’t rush into a decision: There are plenty of platforms out there, and many of them offer great trading experiences with few drawbacks. For instance, Think Forex offers responsive, low-latency executions and razor-thin margins. It also features a comprehensive demo account program and three trading tiers to accommodate a wide range of trading preferences. Consider also the mobile friendliness of your preferred partner – they should have a mobile-friendly interface that enables you to manage your activity on the go.
Successful forex trading requires a comprehensive and evolving program of risk management. By developing a strong trading system, remaining objective in the face of losses, and working with a respected forex partner, you’ll give yourself the tools that you need to profit from the exciting world of currency exchange.