- It is a huge mistake to let emotions control trading. In order to decrease risks and loss, eventually to happen, a trader firstly must be enduring, non- competitive and restricted to their plan.
- It is vital to pursue a trading plan that takes into account potential risks and designates the return on investment (ROI). On the contrary, if a plan is not generated, mistakes are more than possible and success possibility is limited.
- In addition to the plan, you have to give the potential market situation. Market fluctuations can bring both losses and risks. This means that you have to follow the changes of the market and adapt to them, otherwise there is danger of lack of innovation to profit.
- Due to the fact that risk in Forex Trading is essential, traders must be also focused on risk management. You must be aware of the possible degree of risk according to your investment. The larger the amount spent the higher the risk and also the larger the need for capital conservation is.
Forex Trading allows traders to leverage their accounts and increase gain and control loss. Despite the fact that large amounts can be used, traders decide for the leverage use.
The most common leverage is 2:1 by trading a typical group, e.g. $200,000 for every $100,000. The amount of margin (safe amount deposit in case of loss) generates the amount of leverage. Where a bad progress is held, where brokers require more cash deposits, which if they don’t obtain, there position is sold at a loss, so as to minimize additional losses and even re-gain their capital. For brokers, examples of leverage levels are: Margin 5% with Maximum Leverage 20:1, Margin 3% with Maximum Leverage 33:1, Margin 2% with Maximum Leverage 50:1, Margin 1% with Maximum Leverage 100:1 and so on.
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In many cases, traders fail because of the imbalance between their capital and the trades they make. It requires only one wrong move to suffer a complete los and even the small ones taken by being stopped out of a trade early, only exacerbates the problem by reducing the overall account balance and further increasing the leverage ratio. However, when leverage is high, the transaction costs increase and the account worth is reduced.
In conclusion, you have to be aware of the fact that forex trading positive outcomes of it are long term. In order to succeed you have to act step by step, chose the right leverage level according to the capital invested, be able to manage risks according to the market fluctuations and currency pairs.