First and foremost, when it comes to learning about forex – whether you’re a novice on the trading floor or consider yourself an experienced professional – arguably the most important lesson you need to know is how to understand risk. After all, while this market enables you to make big wins, there’s also a high possibility of facing big losses too. It’s crucial, therefore, that you understand how to reduce your exposure to risk in order to reap the potential rewards.
So, in today’s blog post, we’re offering up 3 handy forex trading tips on how to establish a set of trading habits to reduce your risk exposure – helping you make safer, more thought-through trades and increasing your chances of success on the market as a result.
Check, check and check again
When it comes to forex trading, arguably the most important habit to adopt is to ensure you check, check and check again.
As a result of forex’s globally interconnected online trading platform, digital trading has never been easier. With the ease enabled by this electronic platform, there is an increased risk of error – mistakes that could be the difference between a successful or failed trade. Therefore, it’s vital that you triple check all your trades before placing them in order to avoid the potential for silly errors.
Additionally, be sure to regularly check your strategy against external, contextual factors such as a forex calendar and the latest current affairs and forex news, as this will prove to be useful and ultimately drive you to alter your strategy accordingly.
Don’t deviate from your plan
To be a successful trader, you must have an established forex strategy that you regularly use to inform your trades on a weekly, daily and hourly basis. While it can sometimes be tempting to stray from this and make emotional decisions in the heat of the moment, the reality is that this type of reactive trading is incredibly reckless and almost never pays off.
As a bare minimum, you need to have a strict plan to help you decide when to both enter and exit a trade, making sure you don’t deviate from these boundaries to limit possible temptations of often detrimental emotional trades and impulsive movements.
Frequently withdraw your cash reserve
Unless you’re looking to increase your quantity of trades or position sizes, there is almost no need to store away excess funds in your trading account. As such, one of the most important habits to consider practising is regularly withdrawing your funds from your online account.
By removing the element of temptation that excess money in your account demands, the probability of you making emotional, poorly informed decisions is extinguished and you’re also able to actually see your profits, as opposed to simply reinvesting your turnover.
In forex, experience brings with it an arsenal of tried and tested habits that ultimately help you become an efficient, successful trader. Following the above forex trading tips, as well as regularly consulting your forex calendar and staying up to date with the latest forex news, is sure to help you keep risk down to a minimum. For more trading tips, tricks and useful advice why not sign up to one of our award-winning industry seminars?