(MENAFN- MENAFNAuthors) Forex trading is increasingly popular these days. Everybody is talking about it and it is seen as one of the easiest and fastest ways to build wealth. And, data shows that the Forex market is the largest globally, worth $1.93 quadrillion which is 2,5 X larger than the global GDP.
So, there is no surprise that there is such a huge hype about trading currencies. Today, over 43% of traders are millennials aged 25 to 34 years and there has also been a rise in the number of female traders over the last few years. So, trading Forex is really for anyone who wants to earn extra money or even build wealth.
Yet, like with any other type of investment, trading Forex poses certain risks that traders expose themselves to. And, since it is so easy to get caught in the hype of “building wealth fast”, traders may ignore risks and fail to make informed trading decisions.
Want to join the Forex market for the fun and the profit? First, you need to learn how to do responsible trading.
Assess risks
One of the biggest challenges of trading Forex, that can make you lose your entire capital, is the volatile nature of the market. In theory, the volatility of the market offers great profit opportunities. However, it also carries a great risk of losses.
A recent study shows that 99,6% of retail Forex traders can’t achieve more than four back-to-back profitable quarters. What does this mean? It means that risks and losses are inevitable, especially in such a volatile market as the Forex market.
Assessing risks is the first step in managing them efficiently in order to avoid losing your capital. From understanding the certain patterns of the currency that you are trading to understanding how much you afford to invest, taking such factors into consideration is the best way to be a responsible trader.
Like it or not, when you are investing your money, there is also even the slightest possibility that you will lose instead of making profits. So, the better you are at assessing risks, the fewer chances of making poor trading decisions that will make you lose your capital.
Perform market analysis
Performing market analysis is somehow related to assessing risks before entering a trade. It can help you determine when it’s the right time to enter a market and where. But, most importantly, it can help you know what it is the time to get out.
What is analysis of the Forex market? Simply put, technical analysis involves studying the price action which will help you determine certain patterns and possible future movements of the market.
There are three types of analysis for the Forex market: technical, fundamental and sentiment analysis. And, there is a constant debate among traders on which type of analysis is better. However, knowing all three of them is a major plus in improving your trading skills and minimizing risks.
Trading indicators help to analyze the Forex market, such as moving average, stochastic oscillator or relative strength index, so every trader should know how to use them to gain more insight into price trends.
Don’t trade when you are in a bad mood
Generally, there can’t be anything good when you are in a bad mood. Whether you are stressed, sad, or having negative thoughts, it is very unlikely that you can focus on important tasks.
Managing your emotions is an important part of Forex trading psychology. From psychological stress to greed, and lack of confidence, these are all common emotions that both novice and veteran traders tend to experience. Generally, investments can put a lot of pressure and stress on your shoulders, especially if there is your money on the table.
And, you may be a master in trading knowledge, know thousands of successful trading strategies and how to use indicators efficiently. Yet, if you are in a poor state of mind, your chances to win can decrease drastically. Why? Because stress and financial decisions of all types simply don’t go well together.
According to a study from Rutgers University, stress has a major impact on risk-taking during financial decision-making. So, if you are under great financial stress or deal with certain negative emotions, it is always recommended to avoid trading.
Putting your money on the table and losing them isn’t really good, right? That is why another powerful emotion experienced by traders is anger after losing a trade. Like it or not, it is impossible to win every trade you enter because the market is volatile and changes can happen at all times.
So, in this game of odds, you must learn how to deal with failure too. Start by understanding that the market will sometimes not move the way you want it to and that sometimes you may be losing a profit opportunity because you let it slip away. Either way, both these scenarios can lead you to anger which will only also affect your future trading decisions.
Once you learn that emotional discipline is one of the keys to trading success, it will be easier to make better trading decisions.
Go for copy trading
If you are feeling a little bit overwhelmed by the intimidating game of the odds, there is no shame in looking over the shoulders of veteran traders to learn a trick or two.
What does copy trading mean? Well, as its name suggests, it allows you to follow the trades from other traders that you believe are more experienced and profitable than you. The trick with copy trading is that it minimizes the risk of making poor trading decisions as all you do is to copy every single decision a certain professional trader makes and you get the same identical returns on the trade. It is a great tool for those novice traders who aren’t just ready to join the Forex trading game on their own.
There is no magical secret on how to be a good trader. However, being a responsible trader maximizes your chances to earn profits and avoid losses. It takes good risk management, discipline, and the ability to control your emotions to remain profitable over time in the Forex market.
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