How to Limit Your Forex Losses

Aug 12

How to Limit Your Forex Losses

In order to effectively trade forex, you must understand the risks that you run. Success is never guaranteed, and those who invest in the currency markets will know that there can often be a large amount of money at stake.

These vital realities lead to the common misconception that forex is a game only played by those with the hallmarks of a true gambler, yet this isn’t actually the case. Even the most conservative, money-minded, risk-averse individual can take their place amongst the professional investors, natural born libertines, and bold-as-brass money-makers that often people the world of forex – the trick lies in knowing how to limit your losses.

Here are three top tips to help you get started…

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Tip One: Choose the Right Broker

Arguably the most important component in any successful forex strategy is choosing the right broker, and the firm you pick is one of the most effective tools at your disposal when it comes to limiting your losses. There are three main types to choose from – execution-only, advisory, and discretionary – and these will offer varying services and levels of support. The people behind these firms will be professionals, and the more power you give to them, the higher the likelihood that they’ll safely guide you towards trading success. Find someone that will understand your goals, requirements, and the risks that you’re willing to run, such as OANDA, and they’ll keep a steady hand on the wheel on your behalf.

Tip Two: Do Your Homework

Another means of limiting your forex losses is through carrying out as much research as you possibly can. There are thousands of ways to reduce the risks that you run, from choosing a stable combination to diversifying your portfolio, and the more of these you can familiarise yourself with, the more of them you can apply in order to safeguard your investments.

The trick lies not only in implementing preventative measures, but also in studying the markets as closely and as fervently as possible, in order to give yourself the best chance of spotting potential dangers and successfully circumventing them.

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 Step Three: Don’t Invest More Than You Can Afford to Lose

Thirdly and finally, the simplest way to limit your forex losses is by bearing in mind this one simple truth: you don’t have to make a profit on every trade, but you do have to profit overall. Although you might imagine that you’ve found the most exciting investment around, this doesn’t mean that you should stake everything you have on its success. The foreign exchange is a volatile beast, and if things don’t go to plan, you can’t afford to run the risk of losing the entirety of your account balance. Limit yourself to staking an amount that you can afford to forego, and you can ensure that your account is always in the black.

 

Trade successfully today with these three top tips.