Three Ways to Avoid Losing Money in Forex

There are good and bad reasons to trade the Forex market. Proponents of trading foreign currencies note that the Forex market is huge and trades nearly twenty-four hours a day. Major currency pairs include the Yen, Euro, British Pound and the US dollar which is part of eighty-five percent of all trades. These currencies trade in high volume and liquidity making technical analysis more accurate. Proponents also note that you can trade with high degrees of leverage such as 100 to 1. However, there are winners and losers in each and every trade. With that thought in mind we take a contrarian approach and consider three ways to avoid losing money in Forex. Three ways avoid losing money in Forex may well include simply not trading foreign currencies but we assume that you are reading articles on this site because you want to trade Forex. So, read on for our three ways to avoid losing money in Forex.

Remember That Trading Currencies is a Business

Forex trading in the Forex market is a job. Forex trading can be a very lucrative job with wonderful Forex profits. You make your Forex profits in the Forex market by doing your homework, knowing your Forex software, and being well versed in the Forex market currency pairs you work with. But Forex trading is with real money and for every person who makes Forex profits there is a person who does not. In fact for every person who makes a lot of money there may be lots of people who lose money. The first of our three ways to avoid losing money in Forex is to take the job seriously. That means learning the necessary skills, showing up for work on time every day, doing your homework and learning to manage your trading capital.

Getting In, Getting Out, and Keeping a Reserve to Exploit Opportunities as They Arise

The second of our three ways to avoid losing money in Forex specifically has to do with managing and protecting trading capital. Forex trading is not gambling and you should never bet your money all in on a hunch. Good traders analyze the fundamentals of the currencies that they trade and they keep up to date on a daily basis. They also follow evolving market sentiment with technical analysis tools. Smart traders use specific signals that are based on statistical analysis to set up and execute trades. They do not go looking for trades but let the trades come to them. And smart traders always, always set their trading stops so that they limit their losses in sudden market shifts. And they pay attention so that they can adjust their stops as a currency rises in value. The most important aspect of this is to always keep part of your trading capital in reserve. First and foremost this assures that you will not be wiped out in a big market swing. So while you are letting profits mount in one trade that you will be able to take advantage of a golden opportunity that comes along at the same time.

Do Not Be Too Much of a Contrarian

Be careful not to assume that no one makes money in Forex. Study, patience, and execution are by themselves three ways to avoid losing money in Forex. You can trade all day in simulation trading to build up your skill set. There is nothing wrong with spending an hour or two a day reading up on factors that drive currency prices. No one ever lost money simply watching the market when things are confusing. And learning to push the button at the right time, get in, get out and count your money is absolutely possible.