Ask any Forex trader how much he is willing to earn or lose and he will never reply in the negative. Everyone enters the market with big dreams of only earning profits. But reality soon sets in and you realize that the losses are an integral part of the Forex trade. You need to learn how to trade be able to limit your losses. Given below are a few tips that will help you to learn currency trading.
Discipline – The first thing that you need to learn is discipline where you read the charts and follow your established system of trading. Technically analyze the charts to help you decide the entry or exit points that seem to be the best.
Technical analysis – This is one of the basics of Forex that every trader has to learn. It involves understanding the trend of the market by using charts. By understanding the support level and resistance level, you will know when to enter the marker and when to exit it. They can also help you to decide upon a series of small trades rather than a single big one. The benefit of this is that you will be earning smaller profits and the chances of a big loss are reduced.
Reward to risk ratio – The next part is establishing a reward to risk ratio. You can begin with a 2:1 ratio and proceed to 3:1 when you are more comfortable with trading. When you are well versed with the technical side of the market, the possibility of a big loss will act as a reason to exercise more self-control.
The reward to risk ratio will tell you where to place your entry, exit and stop loss orders. You also need to create a strategy for trading and stick to it so that you can be a successful trader.
Don’t chase the market – Your stop loss order can be too tight or too big resulting in your having to lower or raise the order so that you do not get hit. Placing the stop – loss order correctly ensures that even if you do get hit, you do not lose anything.
An inexperienced or emotional trader can turn a good profit to loss when he chases the market. Learning how to trade properly will help you to maximize the profits and reduce the losses.