Smart And Safe Techniques To FOREX Trading

April 2, 2014 2:04 pm0 commentsViews: 86

By : Emily Blackchurch

forex4Forex has often been billed as a quick way to earn easy cash, but it can also be a quick way to lose a lot of cash. The premise of Forex is simple enough. You gauge whether or not one currency is going to gain value when compared to another currency. Most investors feel as though they are competent to read charts, notice trends, and make well-informed trends; but, it’s not always that easy. In fact, there are certain instances when emotions can get the better of you. In order to be a good Forex trader, you have to have a good trading psychology or discipline.

The promise of easy wealth is often difficult to resist, which is why gambling has such a magnetic appeal for some people. The feeling that all it really takes to get rich is a few lucky breaks here and there can be pervasive. In a game of roulette, you are no better off placing your chips on even than you are placing them on odd. Any decision can be the wrong or right decision in gambling.

There’s big difference between gambling and Forex trading. Where gambling in most situations is a game of random chance, Forex trading and the trends on the Forex market can actually be predicted. It is certainly more possible to make rational, smart decisions with Forex trading than with gambling.

Smart Forex Trading

Even if you think you can predict the trends in a particular currency pair, it is still always best to trade intelligently. Practicing good trading psychology is a major key to your success (or at least your avoidance of absolute failure). For instance, if you think you notice a trend forming, then go ahead and make the right trade. But, don’t get so confident forex2in the trade that you put up all the money in your account. It is easy to become a “big spender,” especially when you’re working with a great deal of leveraged money.

Don’t go into Forex trading looking for an immediate, big payout, because you will likely be disappointed. You may also end up trading higher and higher amounts, increasing the chances that you’ll lose a lot more. If that happens, then you may feel desperate to get all your money back in one fell swoop. You may start making trades rapid fire without considering the trends or risks. This is commonly referred to as “revenge trading,” as you try to get back what’s been taken from you. But, in most cases, you will just end up losing more. It is better to accept your loss, move on, and try to continue making smart decisions that give you the best chance of making money.

Techniques for Safe Trading

With many trading platforms, you are given several options to mitigate your losses or ensure your gains. A “stop-loss feature” allows you to set a point at which you will either buy or sell to avoid losing more money. For instance, if you sell a EUR/USD currency pair expecting the pair trend downward, then you can set a stop-loss function to save yourself in the event that the pair actually rises.

Likewise, if you want to ensure that you earn your gains, you can put in a “take profit” or “limit order” function. For instance, let’s say, in the above example, that the EUR/USD pair does make a trend downward. If you are not online in your computer while it is losing value, then you may miss an opportunity to buy it back. By putting in a “take profit,” you ensure that you will buy the pair when it hits a certain threshold. With that, you are guaranteed to earn your money.

In the end, Forex trading is about making intelligent, sound decisions with your money. Don’t spend too much of your money and always make sure you cover your own back. Put in “stop-losses” and “take-profits”. Don’t get caught up in revenge trading. If you do it right, Forex trading can be a fun and potentially lucrative hobby.

 

Emily Blackchurch is an expert who is able to explain personal finance topics in simple words. Forex and stock trading are her main focus areas. Emily is an experienced writer of Forex analytics and forecasts cooperating with FXOpen broker. FXOpen is one of the leading Forex brokerage companies, known for its ECN and STP accounts.

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