TRY TO CONTROL YOUR EMOTIONS:

Maximum traders lose money in the Forex market due to their inability to manage their fear, greed, and emotions. Their greed increases when they make good returns in a very short duration. Less control over greed leads traders to speculate more without really analyzing the risks involved. Instead of generating more profit, these traders thus lose their hard-earned money as soon as the market reverses. On the other hand, when trades are in negative, traders panic and close their trades at rock-bottom prices. Thus, greed and fear are the worst emotions to feel at the time of trading. In Forex market, everyone wants to achieve as much wealth as possible in very short duration but fear and greed are emotions that let executing your trades incorrectly even though you know what is right and what is not. In order to control your emotions, you should avoid getting rich quick mentality.

 

INVEST IN FINANCIAL EDUCATION:

The money and time you invest in your education translate into a higher earning potential for you. Increasing your education is the best investment you can make in yourself. Inadequate education about technical and fundamental analysis means leaving someone unequipped in front of a lion. Although fundamental and technical analysis doesn’t make exact predictions, it helps traders to anticipate the future. The main objective of the fundamental and technical analysis is to help the traders to make a correct and financially sound investment decision. Trust me an investing in Forex education can open new doors and opportunities for you. In order to invest in the Forex market, you must be well-versed of the current and historical currency trends and price fluctuations. Technical analysis provides you with all the relevant information which you need to make a profitable decision. There are companies which educate traders about technical and fundamental analysis. So, by investing in technical education, you not only provide yourself the opportunity to earn big in Forex market, but also the vast knowledge that will give you a lot of advantages throughout the rest of your life.

 

FOLLOW A SINGLE STRATEGY:

In the market there are multiple strategies and if you are sure that your strategy is working stick with it.  if not, stick with a strategy that works for others. If any particular strategy is working well for others but you are comfortable with, then you must find out something that you are comfortable. Forex Trading is a function of risk and reward: The more you risk, the more you can earn. Let’s take an easy example: Let’s assume you start with a $500 account and you would like to take risk of  $100. You could now place a trade to go long at the opening, set a stop loss of $100 and a profit goal of $100. Let’s say you analyzed the market performance in the past few months and found that your probability of achieving your profit goal is 70%.

Unluckily the trade you just opened starts moving in negative, and you lose the whole $100. As this was the amount you were ready to lose, you finally close your account, withdraw the remaining $400 back into your online wallet.

Let’s take another scenario, you would like to take risk of $10 per trade and you fixed your profit goal to $10, too. You have decided now to open at least 10 trades. If all 10 trades are going negative, you will lose the $100 which you are going to invest. Let’s no go in mathematics, but if we talk about statistics, it says that the probability of losing 10 trades is less than 1%. Hence, it’s more likely that you will have a few positive trades out of 10 trades. Again, If your analysis shows the same results as it did in the previous scenario (70% winning), you should make $40: 3 losing trades * $10 = -$30 + 7 winning trades * $10 = $70. Hope it makes sense.

Let’s move forward and compare these two options:

·           The chances of losing your funds in scenario 1 is 30%. However, if you won, you would have made $100.

·           As far as scenario 2 is concerned, the chances of losing your funds after 10 trades are less than 1%, however, you have a very good chance of earning $40.

For that reason, you have to determine first how much you are ready to lose because the amount you can earn is a reward of that risk which you are taking. I hope it makes sense.

Remember that there’s a difference between the amount you’re willing to risk and the amount you need for trading. One more thing is that your broker always need “margin” as a security, and you have to deposit according to the margin requirement + your risk.

 

CHOOSE YOUR BROKER CAREFULLY

When you invest your hard-earned money in the Forex market, you always expect good returns out of it. Good return depends upon the type of broker you select. Selecting the right broker is a very important decision while investing in the Forex market. Unreliable or a fake broker revokes all the profits made through hard work. In order to protect yourself, never forget to keep a detailed history of your transactions just like in a court we need to win a case, Unreliable and unregulated brokers can cheat anytime, that is why it is always better to keep a detailed history of your transactions and suspicious broker activity as odd price feeds. The simple way to maintain records is to take a screenshot of each order you put, other suspicious broker activity like odd price feeds and each trade you take. Apart from this always consider the following point before investing your funds:

●     BACKGROUND CHECK: It is a basic key point for every forex trader to do a detailed background check of the brokerage firm and broker as well. Always try to look for past performance of the broker on Google, client reviews and how many years is he into the industry,  etc.

 

●     TRY WITH MINIMUM BALANCE: In order to check to withdraw, slippage, and transparency, etc, It is important to open an account with a minimum balance. You can check and compare different brokers on google.

 

●     COMPARE COMMISSION AND SPREAD: This is also very important for every trader to compare spread and commission before investing their hard-earned money. You should avoid those brokers who offer Fixed spread as they are mostly dealing desk brokers.

 

●     ALWAYS INQUIRE FOR HIDDEN FESS: There are some brokers who levy hidden fees at the time of withdrawal and deposit. So, never hesitate to ask such hidden charges.

 

TRY TO UNDERSTAND YOUR RISK TOLERANCE:

Risk tolerance means the degree of anxiety we feel when risk is present and how we feel about risk. In simple words, would we risk $1,000 to win $5,000? Or $5,000 to win $5,000? There is no “right” balance in risk tolerance, and all traders vary in their risk tolerance. Risk tolerance can also be affected by one’s sensation of the risk. For example, riding in a car or flying in an airplane would have been assumed as very risky 100 years back, but nowadays airplane and automobile travel are considered very common and safe. On the other hand, most of us today would experience that riding a horse is much dangerous because few people use horses. Same concept with trading. As we gather more knowledge about trading– for example, how financial instruments are sold and bought, and the ease or difficulty of liquidating an investment and how much volatility usually present in Forex market, – we are likely to consider Forex market to have less risk than we thought before making our first deal. We should never buy and sell an asset which keeps us awake all night. If we understand our risk tolerance, we can exclude those investments which are likely to trigger our anxious. Anxiety develops fear which stimulates emotional responses in place of logical responses.

 

ALWAYS INVEST YOUR SURPLUS FUNDS:

You might have heard news about people into debts due to the investments they invested

in Forex market. There are some traders who take loans from their relatives, friends and sometimes from Bank to invest in Forex market in order to earn healthy profits and repay the loan. If you are a newbie in Forex market, you should always consider investing your surplus funds. As soon as you start earning profits, re-invest it rather than taking debts or loans from Finacial institutions.

 

PRACTICE ON DEMO ACCOUNT:

A virtual Forex trading platform, allows you to test your trading skills and strategies without making any real losses. Whenever a trader opens a demo account, he receives virtual money which can be used to measure his trading performance. It highly advisable to start with a demo account which many brokers offer for free. Invest only when you are quite sure about your trading strategy.

 

NEVER PUT ALL OF YOUR  EGGS IN ONE BASKET:

Diversification is considered one of the foremost tenets of financial planning and investing. There are various trading instruments in the Forex market, the most common being, Forex, metals, CFD and others. Each trading instrument contains a different set of risks & rewards and acts differently in various situations. The proportions vary based on your investing time horizon and risk tolerance. Since there is no golden rule of telling how investment vehicle or one asset will perform, you should not put all your hard-earned money into just one asset class.

 

BACKTESTING A TRADING STRATEGY

Backtesting a trading strategy is a procedure to look back and check if your strategy has made profits. The unfortunate thing is that past results are not a guarantee of future profits. However, back-testing helps you in building confidence that your strategy has some merits and can be considered for the future.

 

 

Disclaimer: The investment tips and views are expressed by investment consultant on circlemarkets.com are their own and not that of the website or its management. CIrclemarkets.com strongly recommends traders to consult with certified experts before investing their hard-earned money.