The global forex market is the biggest financial market in the world1. Foreign-exchange traders at all levels are attracted by the opportunity to make profits. Because access to the market is easy--with round-the-clock sessions, significant leverage, and relatively low costs--many forex traders quickly enter the market, but then quickly exit after experiencing losses and setbacks. Here are 10 tips to help aspiring traders avoid losing money and stay in the game in the competitive world of forex trading.
Do your Homework
Forex is not easy to learn, but that doesn't mean you should ignore due diligence. A trader's success depends on his or her knowledge of forex. Trader success is dependent on forex knowledge. This includes the geopolitical, economic, and political factors that influence the currencies of traders.
KEY TAKEAWAYS
* Avoid losing money on foreign exchange by doing your research and finding a reputable broker.
* Use a practice account before you go live and be sure to keep analysis techniques to a minimum in order for them to be effective.
* It's important to use proper money management techniques and to start small when you go live.
* Keep a trading journal and control the amount of leverage.
* Make sure you understand the tax implications of trading and treat it as a business.
Homework is an ongoing effort because traders must be able to adapt to changing market conditions, regulations, or world events. Part of this research process involves developing a trading plan--a systematic method for screening and evaluating investments, determining the amount of risk that is or should be taken, and formulating short-term and long-term investment objectives.
Find a Reputable Broker
The forex industry has much less oversight than other markets, so it is possible to end up doing business with a less-than-reputable forex broker. Due to concerns about the safety of deposits and the overall integrity of a broker, forex traders should only open an account with a firm that is a member of the National Futures Association (NFA) and is registered with the Commodity Futures Trading Commission (CFTC) as a futures commission merchant.2 3 Each country outside the United States has its own regulatory body with which legitimate forex brokers should be registered.
Brokers' account offerings should be reviewed by traders, including leverage amounts and commissions and spreads, initial deposits and account funding policies, as well as account funding and withdrawal policy. A helpful customer service representative should have the information and will be able to answer any questions regarding the firm's services and policies.
Use a Practice Account
Nearly all trading platforms offer a practice account. Sometimes called a demo account or simulated account, this allows traders to place hypothetical trades and not have to fund https://infratraderfx.com/ their account. Perhaps the most important benefit of a practice account is that it allows a trader to become adept at order-entry techniques.
Few things are as damaging to a trading account (and a trader's confidence) as pushing the wrong button when opening or exiting a position. It is not uncommon, for example, for a new trader to accidentally add to a losing position instead of closing the trade. Multiple mistakes in order entry can result in large, unprotected losses. Aside from the devastating financial implications, making trading mistakes is incredibly stressful. Practice makes perfect. Experiment with order entries before placing real money on the line.
Find a Reputable Broker
Forex brokers are subject to less supervision than other markets. It is possible to do business with less-than-reputable forex brokers. Forex traders should only open accounts with a firm that is a member the National Futures Association (NFA), and is registered with Commodity Futures Trading Commission(CFTC) as a futures broker.
Brokers' account offerings should be reviewed by traders, including leverage amounts and commissions and spreads, initial deposits and account funding policies, as well as account funding and withdrawal policy. The information should be available to a customer service representative who will be able answer any questions about the firm's services or policies.
Use a Practice account
Nearly all trading platforms offer a practice account. Sometimes called a demo account or simulated account, this allows traders to place hypothetical trades and not have to fund their account. Perhaps the most important benefit of a practice account is that it allows a trader to become adept at order-entry techniques.
Few things are as damaging to a trading account (and a trader's confidence) as pushing the wrong button when opening or exiting a position. For example, it is not uncommon for a new trader accidentally to add to a losing trade instead of closing it. Multiple errors in order entry can lead to large, unprotected losing trades. Aside from the devastating financial implications, making trading mistakes is incredibly stressful. Practice makes perfect. Experiment with order entries before placing real money on the line.