7 Basic Tips to Minimize Forex Trading Risks

 7 Basic Tips to Minimize Forex Trading RisksForex trading risks are very real; it's not a game. People looking to exchange currency simply as a means of excitement are in it for the wrong reasons. It is important to first understand the market, before you even entertain the thought of trading. Here are 7 basic tips to help get you started on the right foot ...

1. If you fail to plan, you plan to fail

Have a good plan in place for trading in the foreign exchange market. Instant profits in the market are not realistic. You need to be careful and go slowly and methodically. Think about what you are going to do when you join the world of forex trading, do not just jump in with no forethought. Unless you can pin down a motivation for your action, it's probably too dangerous for you to take that action. Your broker can walk you through the different issues that arise and give you helpful advice.

NOTE: While it is useful to discuss your issues and experiences with others involved in trading, it is important that you learn to rely on your own judgment. While other people's advice may be helpful to you, it is down to YOU to make the ultimate decision.

2. Write everything down

It's a very good idea to keep a journal of your experiences within the Forex market. Write down all of your triumphs and defeats in your journal. This will help you keep track of the results of your actions in the past and let you make better decisions moving forward. It is important to discover and understand the true nature of your market. If you trade in the market for any length of time, you are going to experience losses. Only one-tenth of all traders stick with trading long enough to make a decent profit. When you understand the inherent truths of this market, you are able to use logic and convince yourself to keep trying. In turn, you will eventually turn a handsome profit.

3. Keep it Simple

When you are first starting out in Forex trading, avoid spreading yourself too thin by entering too many markets. Trading in a broad range of markets can be confusing, even irritating. Instead, focus simply on the major currency pairs. This will not only increase your chances of success, but will allow you to minimize your risk and help you to feel more confident in your abilities. Steer clear of trading in uncommon, or infrequently used, currency pairs. When you trade with the main currency pairs, you can buy and sell very quickly, because many people are trading on the same market. However, if a currency pair has low liquidity, it can be difficult dump the currency quickly when you're trying to sell.

4. Analyze everything

Use every type of Forex analysis at your disposal. There is technical analysis, sentimental analysis, and fundamental analysis. Using one type of analysis while ignoring both of the others is a recipe for disaster. As you learn and gain experience, you can integrate all three types of analysis to get a much clearer picture of the market.

5. Always use stop loss markers

Some traders think that their stop loss markers show up somehow on other traders' charts or are otherwise visible to the overall market, making a given currency fall to a price just outside of the majority of the stops before heading back up. This is a falsehood, and it is dangerous to trade with no stop loss marker in place. Moving your stop loss points just before they are triggered, for example, will only end with you losing more than if you had just left it alone. Take a break from the market for a day or two to let yourself cool down. Keep a daily log of changes in your journal to create a better overview.

6. Locate dominant patterns

In currency trading, up and down patterns of market can always be seen, but one is usually more dominant. If you have signals you want to get rid of, wait for an up market to do so. Use your knowledge of market trends to fine-tune your trades. Again, use your journal to keep notes of patterns and trends.

7. Forex trading risk management and appropriate losses

The most important factor to consider when making trades is risk management. Be sure you know what an appropriate loss of capital is. Make sure you watch the market, and stick to your strategy. You can lose everything more easily than you think if you don't focus on preventing loss. Determine what a losing position is for you, and figure out how to stay ahead of that. As a foreign exchange currency trader, one of the most important guidelines you should follow is that of learning when you should cut losses and exit a losing trade. Many people prefer to throw good money after bad, instead of pulling out. This is a bad strategy.

Be aware also that there are downfalls to a highly leveraged user account. Though it may offer greater flexibility, new traders who use heavily leveraged accounts do so at escalated risk, and may incur major losses. Make certain you understand the risks involved before jumping in - and remember we're try to minimize our trading risks!