The foreign exchange market is undoubtedly the largest financial market in the world. The potential to make more money has enticed many foreign exchange traders.
The fact that you can exchange foreign currencies in your comfort to make profits look quite easy. You need to understand that you really need to ‘know how to be a successful trader.
If you have been losing money in forex either you’re in the greenhorn level or a seasoned professional, you need to get it right. Getting it right will help you to avoid losing money.
This post is to help aspiring traders avoid losing money and stay in the game in the competitive world of forex trading. Before then, let’s know more about forex.
What is Forex?
The Forex exchange market also known as ”Forex” or ”FX” is a global marketplace for the exchange of national currencies. In this marketplace, traders aims to make profits by exchanging one national currency for another e.g. Euros for the US dollar.
People all over the world meet online for the exchange of foreign currencies. The market is decentralized meaning you don’t need to meet physically to perform an exchange. All you need to perform such exchange is an internet connection on your laptops and mobile devices.
Do People Really Make Money Trading Forex?
People make a lot from trading forex. In fact, a whopping $6.6 trillion dollars is up for grab daily for those who know how.
You can trade anytime 24/7 and the market is opened for 5 days a week using your laptops or mobile devices.
How To Avoid Losing Money in Forex
Just because forex is easy to get into doesn’t mean due diligence should be avoided. You have to do it well so as not to lose your hard-earned money. Below are some tips to help you stop losing money.
1. Do Your Research
To avoid losing your money in forex, you have to do your homework. You have to learn forex trading before you can be successful here.
You need to learn about forex markets, geopolitical & economic factors that affect a trader’s preferred foreign currencies. Asides this, you need to develop a trading plan.
2. Find a Reputable Broker
A forex trader is on the path of failure if he/she does business with a less-than-reputable forex broker. Traders should only open an account with a forex broker that is registered.
Aspiring traders should also research each broker’s account offerings. This includes leverage amounts, commissions & spreads, initial deposits, account funding & withdrawal policies.
3. Practice with a Demo Account
As an aspiring trader, you have to learn how to trade with a practice/demo account before going live to trade. You have to perfect trading to avoid losing money before you go fully into forex trading.
You’ll need to know how to push the right button when opening or exiting a position. Having multiple errors can lead to large, unprotected losing sales. You have get to the act of trading with an unfunded account.
4. Start Small When Going Live
If you’ve really followed the above processes to avoid losing money, next thing is to go live. This is when you should start trading with real money at stake.
By starting small, a trader can evaluate their trading plan and emotions, and gain more practice in executing precise order entries.
5. Use Reasonable Leverage
Forex trading is unique in the amount of leverage that is afforded to its participants. This gives traders the opportunity to make potentially large profits with a very small investment.
When you also have a return on investment, always remember to protect your account. While traders should have plans to avoid losing money, it is equally important to protect profits.
6. Understand Tax Impact & Treatment
It is important for you to know tax impact and treatment when trading. Consulting with a qualified accountant or tax specialist can help avoid any surprises. This can help individuals take advantage of various tax laws.
7. Treat Trading as a Business
Forex trading should be treated as a business to be successful. What you gain/lose in the short term shouldn’t be key into trading but how the trading performs over time.
As with any business, forex trading incurs expenses, losses, taxes, risk, and uncertainty. Also, just as small businesses rarely become successful overnight, neither do most forex traders.
Forex trading is no doubt a way of gaining financial freedom and has attracted traders. The way you approach it from scratch determines your success overtime.
When approached as a business, forex trading can be profitable and rewarding, but reaching a level of success is extremely challenging and can take a long time.
Also Read– How To Grow a Small Forex Trading Account