Forex is an extremely difficult market. It has a lot of risks but you can avoid them.
Here are several things you can do in order to avoid huge risks in Forex:
1 - Use a solid and reliable broker. There are a lot of scams with Forex brokers. You need to be extremely careful when you're choosing one. Don't forget to see if they're regulated, not based in 3rd world countries and if they don't trade against you. If you choose a wrong broker, this can means that you can lose all your money, either trading or when sending or withdrawing your funds.
2 - Use a stop loss. There are a lot of strategies and systems out there that don't even use a stop loss. Using a stop loss is essential in Forex. You don't have to insert your stop loss order; it may just be a mental stop loss. This will keep you from having hard losses but also will avoid the fear and greed feelings.
3 - Don't day trade. As you probably know, day trading requires full time attention. This can be very hard in a market like Forex that is open 24 hours a day. Also, waiting for the right trade(s) can be extremely stressful. Remember that even experienced traders don't always make consistent profits day trading Forex. It's better to trade in large time frames.
4 - Use good risk management rules. No matter if you day trading, swing trading or position trading, you need to follow strict money management rules in order to be successful in Forex. My advice is to put no more than 5% of your account in a single trade. This way, you can lose several trades but you'll still have money in your account to get it back.
5 - Use a good risk/reward. Using a good risk/reward will help you make money but also achieve consistency when trading Forex. You should trade with at least 2:1 risk/reward. This means that for every pip you're risking, you're planning to win at least 2 pips. With this risk-reward, you can even lose 50% of the times and still got money in your account. This will help you keep on the game.
6 - Don't trade during news. This is specially targeted for beginners. There are some news releases that make the volatility increase in a matter of minutes, even seconds. If you're on the wrong side of the trade, or if you enter at that moment in the wrong side, this can be catastrophic. This can mean losing part or your entire account.
7 - Keep learning and practicing. You should always keep learning about the Forex market as well as practicing. This will help you become a better trader since you'll learn how to minimize your risks, have consistency and even develop your own strategies.
This article purpose was to show you, in advance, some of the huge risks that you can face when you're trading Forex but also tell you what you can do to minimize or even avoid them.
John Baker is an editor at http://www.ForexTopTen.com
By visiting the website http://www.forextopten.com you can read forex traders reviews about forex trading systems, trading courses, ebooks, softwares and brokers.
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