The global Forex market is the largest financial market in the world as it turns out over $4 trillion in an average daily trade. The fame of Forex attracts different kind of traders, beginning from the amateurs to the experts in financial market. Just as it is very easy to make money on Forex at any time and gain access to substantial leverage at a cheaper amount the same it is also easy to lose money on Forex.
If you are on the losing side in the market then this tips are for you. Everyone at some point experience’s loss, that’s what comes with trade, but if you are losing excessively and gaining very little and you are unable to stop it. There might be some major issues to deal with in order to stop the loss. We made a summary of 8 ways to prevent losing money in Forex trade.
1. Master your mind
Most traders in Forex lose money because they are unable to control their emotions while trading this is because emotional trading is more appealing and has more to offer than disciplined trading.
The Forex market offers two major options to traders:
a) Gamble your money away through emotional trading.
b) Become a disciplined trader by learning to control your emotional and earn money slow but steady money over time.
I want to believe your aim is to become a disciplined trader so you can make proper decisions while trading instead of gambling your money away like others.
2. Make some findings – learn before you Burn
Most people that come in newly into Forex do not take time to learn the basics about currency rate. When information about a new trade comes out they relax until the best opportunity is over.
It might be easy to get into Forex but it doesn’t mean you can skip doing the right thing. It is quite important to understand the rules of Forex in order to be successful in the trading market. Though most of the knowledge you get about Forex comes from your experience in the field but it is also important to learn all you can about Forex market which includes the economic and geopolitical factors that make traders prefer one currency over others. Traders need to constantly make research in order to handle any change in the market conditions, regulations and world events.
3. Use a Practice Account
Almost every trading platform has a practice account which could also be called simulated account or demo account. These accounts enable the trader to make a trade with an account that has no money in it. Well the major advantage of a practice account is that it enables the trader to have a proper knowledge of how order entry is done.
There are certain things that can destroy a trading account and the confidence of the trader such as clicking the wrong button when opening or leaving a position. Most times a new trader could mistakenly add to a losing position rather than closing the trade. Several mistakes in entry order could result into losing trades. Apart from the negative impact on the traders finance it could cause stress also. It is advisable to try out one or two experimental order before venturing into the real thing.
4 Become a disciplined Forex trader
If you invest a lot of money on a particular trade it means it would be very important to you and you would have more to lose which automatically causes you to worry more and become more emotional. Once you begin trading emotionally you might end up doing more emotional trading. If you lose a large amount of money while trading it might cause you to be angry and frustrated which could lead you into trading carelessly with a large amount so you could regain the lost one. What makes you a good forex trader is being able to avoid this kind of emotional trade.
If you realize you are overtrading it simply means you are gambling or trading emotionally. Therefore if must stop over trading then you have to deal with your emotions and make plans on how to manage your loss in order to avoid overtrading. However, knowing exactly what you want and taking a break after each trade whether it was successful or not would appear to be the best way to avoid overtrading.
5. Trade with a little amount if you are a beginner
When you are done making all your research, findings and practice and you are about to venture into the trading business it is advisable to start out with a small amount because no amount of practice can match up to real trading.
You might not fully understand the effect of emotions and slippage by just doing a demo trading. Also a trading plan that worked perfectly well for the demo might not work out so well for the live trading. It is best to start out with a little amount so you would be able to evaluate your emotions and trading plans and at the same time gain more experience on how to execute order entries. Without putting at risk your entire trading account.
6. Master one strategy at a time
The best way to master a particular strategy is to start out gradually mastering one aspect at a time. As a beginner you need to first master the price action strategy in order to master one price action setup before trying out another. By so doing you would have properly understood the strategy of one setup before learning another one therefore you will be a master of every trading strategy you know of. If you take a look at any specialist in a particular field you would realize they are the ones that earn more money than others. So if you want to become an expert in every trading strategy then it is best you master one at a time.
7. Trade forex like a sniper
It doesn’t end at mastering a trading strategy you have to put it into use. Sadly, most traders do not excel at this because they too impatient to trade like a sniper. It is important that you learn to carefully select your entries and do not trade too often. This is the reason it is called trading forex like a sniper and not a machine gun. A lot of traders trade like a machine gun and they exhaust their ammo (money) too quickly. If you want to properly utilize your money and earn more profit over a long time then you need to carefully make every move so you can get the best out of it.
8. Handle your trading like a business
It is important to handle all your trading like a business and take note that single win or loss does not really count in short run it is the overall performance of the business that really matters. Therefore as a trader you should not be emotionally attached to any transaction whether a loss or gain but rather handle it as just another day at the office. Trading forex just like every other business has losses, expenses, risks, taxes and uncertainty involved. And as small businesses do not suddenly become successful, neither does forex trading. To be successful on forex trading you need to make plans, set realistic goals, stay on track and learn from your successes and your failures.
The Bottom Line
The world wide forex market entices a lot of traders because the account requirement is relatively low and it offers 24 hour trading platform and a high amount of leverage. If you handle the forex trading as a business it might profit you more. Generally, a trader can stop losing money on forex by:
- Being well-prepared
- Be patient and disciplined while learning and researching
- Manage your money properly
- Treat trading like a business