Why do most newbies and professional traders lose their money in forex trading? Every trader must ask themselves this question before entering forex trading. One of the most commonly known facts is that many forex traders fail.
As we know, the global forex market is the largest financial market worldwide. According to different websites and blogs, almost 70 to 80 percent of traders lose their money in forex trading. However, the forex website DailyFx says that many expert traders are doing better than that, but still, beginners have tricky timing in this market.
The article looks at some of the best ways not to lose your money in the forex. They are given below.
Do Your Research
Entering to forex is easy does not mean you will avoid research. The trader’s success depends on their learning. The more you research, the more you will get the advantage in trading. Most of the time, you will learn from live trading and experience.
For a successful trade, a trader should learn everything about the forex market, including all the essential elements like economic and geopolitical factors that affect the trader’s preferred currencies.
A trader needs continuing research to be aware of world events, changing market conditions, and regulations. Risk management and creating short-term and long-term objectives are also part of the research to develop a trading plan.
Look For A Reputable Broker
You may find yourself working with a less-than-reputable broker as the forex market has much less supervision than other financial markets. Make sure that you are working with a trustable broker before going through into the forex market ultimately.
The broker’s honesty plays an essential role in the safety of your deposits. It is crucial to research each broker’s account offerings, including leverage amounts, initial deposits, commissions and spreads, and withdrawal policies.
To know whether your broker is registered or not, you may consult with your country’s regulatory body. The reputable and allowable brokers are registered with regulatory bodies. Ensure you are working with FCA forex brokers in the UK.
Use A Practice Account
You can use a demo account that comes with nearly all the trading platforms to make yourself better at trading. The most exciting thing in a demo or stimulated account is to trade hypothetically with the zero-fund.
Some people might argue that you don’t need a demo account. It is just a waste of time, but you want to make yourself the best, and you can do this by practice. The most crucial benefit which the practice account provides is to adept you at order-entry techniques.
The most dangerous thing to a trading account in forex is pushing the wrong button when entering or exiting the position. These events can happen during trading. For example, the beginner trader adds to a losing position instead of closing the trade accidentally.
Keep Charts Clean
The forex trader should utilize all the analysis tools offered by the trading platform once opening an account for forex trading. Keep in mind that some of the indicators are well suited to the forex industry. Keeping the analysis techniques to a minimum to make the analysis effective is still recommended.
Sometimes, most traders use multiple indicators of the same types, which is unnecessary and can give opposing signals. Avoid the use of a lot of indicators during technical analysis. If the analysis technique does not enhance the trading performance, remove it from the chart.
Protect Your Trading Account
Most traders prioritize making money in forex trading, but it is also essential to avoid losing money. How to manage money is an integral part of the process. When to go into trade and when to exit, these two steps decide whether the trade is successful or not.
Most traders enter the market but don’t know how to exit and accept the current losses to stop further losses. For this purpose, to save the account from more loss, putting protective-stop loss is necessary.
Start Small When You Go Live
After practicing with a demo account, and if a trader has proper research and a trading plan, it’s time to go live, that is, to get into a trade with real money. Starting small when going live is advised because no practice trading can precisely be the same as actual trading.
Use Reasonable Leverage
One of the unique features of forex trading is offering leverage to its participants. That is why most traders get the opportunity to make large profits with a small amount of money. Remember, if the trade goes into loss with leverage, it can also wash the money in the account.
If the leverage is appropriately used, it provides high growth potential.
The Bottom Line
Many traders like forex trading and find it attractive because of the low accounts requirements and having access to high amounts of leverage. Keep in mind while trading in any financial market, proper risk management is crucial.
Forex trading can be profitable and rewarding using the right strategies. However, it is also challenging to reach a level of success and can take time.