4 Smart Ways To Avoid Losses In Forex Trading In Nigeria
Forex trading is like a two-edged sword. One edge is sweet while the other is bitter. You can losses in forex trading here. Forex trade can be a fortune to some, while On the other hand, to the rest it’s the greatest of misfortunes. They find it difficult to avoid losses in forex trading.
Whether Forex Trading becomes a fortune or misfortune to one depends on the individual’s trade practices. This is a function of what one does, how he does them. This act alone is the strong determinant of whether or not the trader makes profits.
Forex if well traded can rake in lots of profits, but can also lead to devastating losses, if badly traded. In essence, all that matters in forex is good trading practices. In that light, this article is here to share practical and out-of-experience tips on how to make huge sums from forex trading and at the same time avoid losses in forex trading.
Kindly read and digest the tips below and you are on your way to wealth:
Ways to avoid losses in Forex trading in Nigeria
Avoid Taking excessive risks.
Beginners in the forex world ought to do themselves and their new careers a huge favor by desisting from huge risks. It’s not advisable to trade huge amounts as a beginner, even if you can afford to. This is because it’s a sure way of gradually losing it all.
Losses in the market are inevitable not minding how experienced the trader is, but as a beginner it’s always more frequent. Hence, the beginner can do himself a whole world of good by minding the loss margins he’s risking at any point in time.
Experts in forex trading have advised that beginners in the market should risk a margin of not more than 1%. This is to give them solid fortress in times of losses. A loss of 1% per trade implies that it would take the trader 100 trades to lose all his deposits. That’s a long trade margin. On the other hand, if the trader risks 10% of his funds, it will take him Just 10 losses to go bankrupt.
The beginner should always do well not to over risk his funds. This will help him avoid losses in forex trading. When you are just starting out in the Forex market, it can be really easy to get caught up in the leverage of the market.Keeping yourself grounded is the best way to make sure you use the Forex market to your best potential.
Over-leveraging one’s trading account, also known as risking too much, is probably the single biggest reason forex traders lose money in the market. You must understand and effectively implement a sound forex money management strategy if you wish to survive long enough in the market to build up your trading account.
Many traders make the mistake of becoming over-confident as they experience an early bout of success in the markets and as a result begin to risk more than they can afford to lose on any given trade. This makes it impossible to avoid losses in forex trading.
Define your money management strategy in your forex trading plan before entering any live trades and you just might be able to avoid this most ubiquitous of trading mistakes and build your forex trading account much faster.So, It’s advised to cautiously trade in bits till you master the market and is able to make more successful guesses about the trend.
Over Trading kills.
Avoiding over trading is another way to avoid losses in forex trading. The frequency with which a particular trader navigates the market is a deciding factor to how long he lasts in the market. Experiences have shown that the most successful traders are not really frequent traders. This is resultant from many reasons.
There are many factors that affect the forex market and these factors determine the profitability of the market at each point in time. Trading can only be profitable when these factors are profitable. These factors range from Government policies, demand and supply of currency, international trade etc. It would be foolhardy to go into trading when these factors are unfavorable and volatile.
A beginner is advised to always take caution to know when it’s Favorable or not to trade. This will save him some unfashionable losses. Probably one of the biggest reasons why traders overtrade is because they think they will somehow build their trading accounts faster by trading the market with a higher frequency.
On the average, traders who trade smaller numbers of transactions each year typically make more money than their counter-parts because this is a smart way to avoid losses in forex trading.. Experience has shown that forex trading has favorable time paths. These time paths record more wins than losses. It’s mostly in the mornings in Nigeria. You should only trade if there is a sound logical reason, such as a very well defined pin bar setup or other price action setup. If you are trading just because you want to be in a trade or you are trying to make money “faster”, you are going to seriously delay increasing the value of your trading account.
Commence Profit Taking
This has to do with the perfect exit strategies. This may seem novel to many but it has been the stronger foot of experts in the market and the weak foot of most beginners and losers.The failure to come up with an exit plan is capable of turning a promising trade into a lost one. An exit strategy can help save the trader from losses in case of sudden reversals in the market trend and also forecast future trends.
When this strategy is not in place, the trader seems to be in a mess.
Most traders concentrate most of their technical analysis on their entries with the attitude of, “I’ll figure out my exit strategy after I enter the trade…I wanna see how it does first”. The problem with this thinking is that you are setting yourself for an emotional exit, which will almost necessarily result in you losing money or making less than you otherwise would have.
The only way YOU can successfully TRADE the market is by pre-defining all aspects of your trading actions, otherwise the MARKET will “trade YOU”, which means instead of mapping out your plan of action before the battle begins you will be forced to compete with your emotions during the heat of battle, and this almost always results in lost money.
You can avoid losses in forex trading if you focus on commencing profit.
Get a Forex Trading Plan
The idea of a forex trading plan may seem too ambiguous to many. To put it as simply as possible, a forex trading plan is simply a sum total of every other smart tip discussed above.
Getting a trading plan is as simple as documenting the above smart tips. A forex trading plan is a necessity for every trader who wishes to succeed in the business. Having a tangible forex trading plan is the basic effort towards eradicating emotional practices in the market.
Trading plan will give your forex adventure more credence. It further substantiates the the place of forex trading as a business rather than a pass time. For someone who wishes to take the act of trading forex more seriously as a business, the trading plan is an inevitable tool.
A forex trading plan help you avoid losses in forex trading. It should not be viewed as a one-off static document, but rather an ever-evolving accountability tool that you can use to master your own emotions and as a result master the market and also audit your personal progress at same time.
Caution ON Simple Ways To Avoid Losses In Your Forex Trading
Don’t put all of your eggs in a basket
This is true for any investment and Forex is no exception. Forex should only be part of your investment portfolio, not all of it. Another way to achieve diversification and tackle market volatility in forex is to trade in more than a single currency pair.
Don’t over-risk it
It’s easy and tempting to leverage yourself a 100 times over. It also makes it pretty easy to lose your shirt. Don’t take huge leverages when a negative outcome could prove too costly for you. It’s easy to lose all of your deposit that way in just one quick fluctuation of the market.
The Stop Loss and stop limit techniques are inevitable
Trading without a stop loss is like jumping out of a plane without a parachute. You’re going to get splattered and it’s going to be ugly. Also, once you set a Stop Loss, you never take it down. Otherwise, it’s like jumping with a parachute but never intending to open it.The Stop limit helps One get off the emotional boat associated with trendy stock hikes which most times act like a bubble and bursts suddenly beyond imagination. When there is a stop limit, the trader identifies at what point of decline to cash in after a continuous rise.
Do not fight the trend
Unless you’re a position trader and you plan to hold a position for years based on in depth knowledge of the economic Future, you shouldn’t go against the trend. Remember, there are players With stronger influence on the market. You’re not going to wrestle the market to the floor. What would you rather do, swim with the current or paddle in the opposite direction?
Educate yourself continuously
The best way to know Forex risk management rules and become a successful forex trader is to know how the market works. This is a continuous thing, so keep at it with the requisite patience.
Use software to help you
To achieve Forex success, make use of trading software and analysis programs which can help you make a better decision. These systems aren’t perfect, but you can still use them as advisors and something to fall back on. Don’t depend solely on Your manual analysis, it’s Less accurate.
Manage your emotions properly
Let all your actions in the market be based on logic and other scientific means and not your beliefs or other sentiments. This will help the trader avoid all avoidable losses.
Do you have anymore tips? Feel free to comment it below!