Understanding The Risk Involved

If you are new to trading on the foreign exchange market and excited to begin your investment journey, it might be worth taking a step back and making sure you are fully aware of the risks involved. Whilst trading Forex has many advantages it is also an environment that can cause you to lose money.

Putting the use of risk and money management into practise is an important rule in forex trading, however you should always remember that even with the safest risk and money management strategy in place, equity in the account is always at risk. We will always recommend that you only trade with what you can afford to lose as a safety measure.

When you’re able to remove any emotional attachment to your investments it will enable you to make better decisions based on the price action and chart analysis. Keeping on top of your balance and withdrawing profits regularly will allow you to keep satisfied and protect your return on investment.

Withdrawing Profits Regularly

There is a lot of different advice available online about whether you should withdraw regularly or leave your investment balance to grow. Ultimately it is important to understand that no matter how safe your risk assessment, whatever equity you have in your trading account is at risk and therefore it is recommended that you withdraw profits regularly and keep the balance at a level that you are still emotionally detached too.

This is known as managing money outside of the trading account and is a great method of keeping Forex trading sustainable. When you are used to having higher levels of equity available in the account reduce the frequency of withdrawals until your balance has increased, and then start the process once again preventing emotional attachment to the balance.

Excessive Over Trading

Beginning your investment journey is an exciting period of change where you will want to have a positive start and move forwards in the right direction. Whilst this is a great mindset to have and one we always encourage, you need to be mindful of excessive trading on both a trade quantities and trade sizes.

We recommend trading on higher time frames which are known to be more reliable, and constraining yourself to entering trades that provide enough profit to warrant the risk involved. A common cause behind a loss is when the lower candle time frames is used to try and increase the speed of account growth. Trading these time frames reduces reliability and frequently causes more problems than it’s worth.

When you decide to open a trade, or are setting up the trading mirror software, it is important to refrain from using excessive trade sizes that may put your account at added risk. Instead try using lower trade sizes essentially minimising your risk, this will keep the account progression controlled and easily measurable.