If you want to thrive when investing in the financial market, you need to safeguard yourself and your capital from unnecessary losses. According to one of the senior financial advisors at Jones Mutual, many new Forex traders tend to delve into trades that carry huge risk. With this risk, they have not yet learned to safeguard their capital and their trading venture as a whole. The financial losses that could be incurred as a result of this are inevitable. With that said, what tips can new Forex traders make use of to stay safe when executing trades?
Get Forex knowledge
It is easy to say you’d want to make money on the Forex market. However, before you can start trading, you need to have knowledge of what you are about to do. You need to consider which currency pairs you are going to trade with, what these currencies entail, how you are going to trade with them as well as when you will actively be trading. With the endless amount of ways to gain trading knowledge, there is no reason for you to stay in the dark. You can learn a lot from other trading experts, podcasts, ebooks as well as the wide world of the internet. Without knowledge, the financial losses you will face would put you back a pretty penny.
Keep your goals reachable
There is no way you’re going to become a millionaire overnight. Trading on the Forex market takes dedication and a lot of patience. To keep yourself safe, you need to set achievable financial goals for yourself. A good way of doing this is making use of a trading strategy. This will help you define every aspect of your trading day so you can easily reach your short and long-term goals.
A stop loss is there for a reason – use it
A lot of traders, even expert traders, forget the most important rule of Forex trading; to make use of a stop loss. A stop loss, in essence, is there to protect and safeguard your capital. This is one of the best tools a new Forex trader can make use of when trading. A stop loss prevents an unprofitable trade from eating away at your entire trading account. That way, should your trade go sour, once you market price reaches the point at which you set your stop loss, the trade will automatically be terminated.
Don’t risk more money than you can afford to lose
As a rule of thumb, it is widely accepted that one should not risk more than 5% of the deposit on a trade. After all, you wouldn’t want to clear out your entire trading account on one single trade. You need to find a balance between risk and reward. Only then would you be able to make substantial profit.
Evaluate your trades at the end of each month
If you take note of every trade and whether they were winning or losing trades, you’d be able to calculate by how many pips you won or lost per trade. With this information, you can restructure your trading strategy according to your findings. With the added information provided by news on different financial markets, finding solutions to minor trading problems will be easy if you can look back at your months’ trades. With that said, keeping your future trading capital safe won’t be that hard either.
Trade on higher timeframes
If you are a beginner Forex trader, trading on higher timeframes will be a less risky option. Higher timeframes consist of the 4 hour or higher window. This enables you to gather a substantial amount of information from your trading chart to make a sensible decision. When trading on higher timeframes, you not only protect your capital, but you are also building a good knowledge base on what direction the market is moving in.
With the above-mentioned tips on how to stay safe when you are a beginner Forex trader, you can dive into the pool of financial market trading on a confident note. Remember that Forex trading always carries a certain amount of risk but it is up to you to find the right balance that will make you the profit you need.