When it comes to receiving a forex education, one of the first things you’ll be taught is the importance of understanding risk. After all, as the world’s most liquid market, the possibility of big wins in forex is naturally contradicted by the possibility of big losses. As such, understanding how to reduce your exposure to such risk is vital to the profitability and subsequent success of any trader.
That’s why today, we’re offering up some forex trading tips on how to develop a set of trading habits that will reduce your risk exposure, enabling you to make safer and more considered trades and increase the likelihood of your profitability on the market.
Never diverge from your plan
Any successful trader has an established trading strategy that they use to inform their trades. Though sometimes it can be tempting to stray from this in the spur of the moment – whether you’re feeling lucky or are following a gut feeling – the reality is that this type of impulse trading rarely pays off.
At a bare minimum, you should have a strict plan as to when to enter and exit a trade, ensuring you never diverge from this to limit the temptation of often detrimental emotional trades and reactionary movements.
Always triple check
When it comes to trading any online market, perhaps the most important habit to pick-up is to check, check, check!
As a globally interconnected digital trading platform, electronic trading has never been easier than the type enabled by the forex market. However, with this simplicity comes a significant rise in the possibility of error. As a result, it’s vital that you get into the habit of not just double, but triple checking all your trades before placing them to avoid any unnecessary mistakes.
Be sure to check all your trades against the market context, too. With so many external factors influencing exchange rates and trading volumes on a day-to-day basis, it’s crucial to remember to check your strategy against the forex calendar and the latest forex news on a regular basis.
Regularly withdraw your funds
Perhaps the most important forex trading tip on this list, is regularly withdrawing your funds from your online account and is arguably the most useful trading habit to develop when looking to minimise your risk.
Unless you’re actively looking to increase your position sizes or quantity of trades, there’s little need to have excess funds stored in your trading account. By doing so, the likelihood of you placing an ill-informed, emotional trade is significantly increased, so removing the element of temptation is an effective way of combating this. Moreover, by regularly withdrawing your funds, you’re ensuring that you actually see your profits, rather than immediately reinvesting your turnover.
As you become more experienced, you’ll begin to develop more habits that help you become an efficient and profitable trader. Following these forex trading tips from the off will help you to keep the risk down to a minimum, ensuring your sustainability as a profitable trader. For further useful trading tips, tricks and habits to help you on a path to success, why not sign up to one of our free industry seminars?