The forex market is the largest financial market, and it holds great potential for profits. This potential attracts all levels of foreign exchange traders, from greenhorns who are new to the market, to veteran professionals with many trading years under their belts. Access to the market is convenient, with enormous leverage, round the clock trading sessions and affordable costs, most forex traders are quick to enter the market. A quick entry to the market signals a quick exit after making losses. To avoid losing money in forex, here are a few tips to help you stay afloat.
Do Due Diligence
The reason most people lose money in forex is its entry ease, and they do not do their due diligence. Learning forex ropes is crucial to your success. While you will gain most of the trading knowledge by experience and live trading, you need to learn all there is to learn about the forex markets, including the economic and geopolitical factors that affect your preferred trading currencies.
Due diligence is a continuous effort as you need to stay prepared for any changes in the market, world events or regulations. This research process includes a trading plan, which involves screening and evaluation of investments and determining the risk level. The plan also involves coming up with short and long-term investment goals.
Engage a Reputable Broker
Be careful about doing business with rogue forex brokers. As a trader, you should ensure you only do business with registered brokers. Investigate on the broker’s account offering, which includes commissions and spreads, initial deposits, leverage amounts, withdrawal policies and account funding. The broker’s customer service representative should be in a position to answer these questions and help you make comparisons.
Use a Demo account
Almost all trading platforms have practice accounts, which are called practice accounts or simulated accounts, which allow you to place hypothetical trades on an empty account. The best benefit of the simulation account is to enable you to become experienced in order-entry techniques. A trading account can be significantly damaged by opening and exiting a position by mistake.
Make use of Trading Platforms
Trading platforms are software that enables you to place and monitor trades via financial intermediaries. The trading platforms such as MetaTrader 4 usually come loaded with features such as charting tools, real-time quotes or newsfeeds. Some platforms charge a fee, but some like the MT4 is free, which allows you to channel the money you would have paid in fees to your trading account. The platforms have downloadable apps that you can download on your mobile phone and keep tabs on your account anytime and anywhere.
Start Small When Going Live
When you have done your homework, practiced with a practice account, and have formulated a trading plan, it is time for you to go live and start trading with real money. There is no simulation trading that can simulate an actual trading session. For this reason, it is wise to start small when you eventually go live.
Factors like slippage, which is the difference between an expected trade price and the actual cost cannot be accounted for or anticipated beforehand. A trading plan that worked well in the simulation could flop when applied in a real trading session. By going small, you can evaluate the plan and gain more confidence in the execution of order entries without risking your trading account.
Trading in forex is a potential profit-making venture. However, you have to be careful and patient. Do thorough homework on the market and ensure you engage a registered broker if you need to use one. Trading platforms come in handy and have various features that make trading easier.
The platforms have apps that you can download to your phone, allowing you to keep tabs on your account and the market trends. Using a demo account will enable you to gain experience before you start trading live. When you do start trading, go live small to avoid making losses before you are fully confident.