7 Tips to Minimise Your Forex Trading Risk

If you’re on the hunt for something entirely risk-free, you might chase shadows. Be it career options or finances, everything comes with its share of uncertainties. In the case of finance, many traders fear the risk that they won’t even trade. But if retreating isn’t in your plan, how do you manage it and still aim for growth? It’s all possible when you have a good risk management strategy. Whether you are investing or trading, risk management is a must. So, let’s see 7 savvy strategies to trim your financial risks! Read More

Go With A Regulated Broker

Your broker opens the doors of the forex trading market for you. From resources to support, they also give you everything you need to survive. So, if you go wrong in choosing your broker, you’re multiplying your trading risk. Opting for a regulated broker ensures you’re working with a partner that adheres to established industry standards and practices. This not only guarantees the safety of your funds but also offers a transparent trading environment. Trust a regulated broker so that you’re placing your investments in capable hands. As a result, you can minimise your trading risk and have a smoother and more secure trading experience.

Test Your Trading Strategies With A Demo Account

“You need a successful strategy to make it in the forex market.” – you might have heard this one every now and then. Highly overused, yet every word is true.

Trading isn’t simply a process of buying and selling things; it’s doing that with an analysis that guides you on when to step in and when to bow out. Get this wrong, and you’re setting yourself up for a fall. However, many traders, caught up in the adrenaline rush, either skip testing their strategies or don’t give them enough runway. Thus, they enter the live market already with a risk.

You can avoid this risk if you practise on a demo account first. This account will clear out your doubts on basic fundamentals, giving you a risk-free environment to test that knowledge. So, before you go all in, spend ample time refining and testing your strategy on a demo account. Open a demo account here – https://www.ig.com/en/demo-account.

Keep Your Leverage Low

“I wish I could see those profits! But, oh, I don’t have that much capital.”

This is the common problem of every new trader. But as soon as they learn about leverage, they are ready to take a little more risk to gain more profits. With just a bit of capital, you can open trades that seem out of reach. For example, with a leverage of 1:100, you can trade up to $100 for every $1 invested. To determine how much margin you require to trade with a leverage of 100x, you can use a margin calculator, which quickly provides the accurate value to help you place your trade without delay. You can find the required margin here: https://www.zulutrade.com/trading-tools/margin-calculator.
Leverage, while empowering, can be slippery. It’s easy to get carried away and face twice as daunting risks. So, use leverage but with a gentle hand. Start with a small amount of leverage. Gauge your performance and increase your leverage if needed. Suppose you don’t know how much leverage you should choose to trade with, use trading calculators to get a clearer idea. You will be required to enter your margin, risk tolerance, and other values to get the best-suited value.

Trade The Major Currency Pairs

You get plenty of pairs to trade in forex. But don’t just jump in and trade any pair that catches your eye, or pick one at random. Why? Simply because not every pair will make you money. You can identify a tradeable pair with higher demand and supply or, in trading terms, liquidity.

Major pairs are the best in this case. You can find the pair of your choice here – https://fbs.com/trading/specs/forex-standard. Traded globally, these pairs are backed by nations with sturdy economies, not those teetering on the edge. So, when you trade them, you can breathe easier, knowing you’re less likely to be blindsided by erratic price swings.

Avoid Crypto Initially

New traders are often hell-bent on raking in profits as soon as they enter the market. Unfortunately, they hunt for shortcuts in their quest for quick gains, trying out assets that promise high returns but come with higher volatility.

Cryptocurrencies are at the top of this list. Now, it’s not that these digital assets are the bad guys on the block. But the real question is, are you prepared to deal with them? If you are in it for the long haul, you should proceed with caution. Start by building a foundation with stable assets. Once you’ve got a grip there and are consistently seeing positive outcomes, you can diversify your account and take calculated risks with more volatile assets like cryptocurrencies.

Use An Excellent Copy Trading service

Forex trading isn’t everyone’s cup of tea. Does that mean you should sideline yourself from trading? Absolutely not! There’s no need to see it as a missed shot at the market’s benefits.

Copy trading provides an alternative for you to trade in the market – a solution that lets you bask in the market’s rewards without getting into the trading fundamentals yourself. This trading strategy works on a simple concept. You copy the trades of a seasoned trader, and those moves get copied into your account. Sounds simple, right? But there’s more to it. Find out more about this incredible technique here – https://www.avatrade.com/education/trading-for-beginners/copy-trading.

Copy trading isn’t just about hitting the ‘copy’ button; it demands its own expertise. From selecting the right trader for copying to deciding on your investment size, you need different kinds of skills. So, if you’re leaning towards this route, do your homework to minimise risks and maximise gains.

Never Forget To Use Stop-Loss

Do you remember the first time you used a new app and fumbled around? Mistakes, right? We’ve all been there, but the beauty lies in learning from those slip-ups. Trading is no different. As a newbie, you might find yourself on the losing end more often than you’d like.

But here’s the silver lining: much of this can be sidestepped with the strategic use of stop losses. Think of them as your safety net, automatically set in place to pull you out of a trade once your losses hit a predefined threshold. You can use a pip calculator to find out the best price levels for stop losses and/or profits for your trades. Here is a good one for you – https://www.zulutrade.com/trading-tools/pip-calculator. This tool will help you calculate the pips in your own currency, thus letting you know how much you’ve made or lost. Then, you can write it all down in your trading journal to avoid the mistakes you made or to repeat the right moves.

As emotional beings, we often get starry-eyed, dreaming of the profits and the highs. But the currency market? It moves in its own rhythm, unpredictable and ever-changing. So, while optimism is great, put your trust in risk management tools like stop losses to keep your trading journey grounded and protected.

Conclusion

“Risk management in forex trading isn’t just a strategy; it’s the backbone of every successful trade.”

If trading were simply buying and selling for profits, there would be less risk and no fun in trading. But risk is as much a part of trading as rewards are. Therefore, managing this risk is the only way to find sturdy ground in forex. We’ve laid out seven strategies to minimise risks, each a stepping stone towards a more secure trading experience.