The reason why most investors are attracted to online forex trading is the fact that it is a relatively easy-to-enter market. The initial capital required to start trading is fairly low and the market itself happens to operate on high liquidity. But the one fact that most forex trading traders do not understand is that even if the market is easier than others, actual investments need fine-tuned strategies and sharp thinking to reap sustainable returns. Forex trading experts hone their skills using incessant practice and discipline. They also conduct self-analysis to figure out what exactly is driving their investment strategies and whether or not these influencing factors are worthy of their attention. Fear and greed both, should not be a part of the equation anyhow.
So, if you are new to online forex trading and are simply testing the waters, here is a list of ideas that you can follow and mistakes you should avoid to safely and successfully manage your portfolio.
Online Forex Trading – Ideas to Follow
Determine entry and exit points
Looking at charts in different time frames can often become confusing. What looks like a buying opportunity on a weekly chart can emerge as a loud-and-clear sell signal for an intraday analysis. Keep your timing in sync and fix entry and exit points with both timeframes in mind to ensure your online forex trading strategies are on point.
Calculate your expectancy
Evaluation of your trade strategies is important to determine whether or not you are reading the market right. Measure your trades that were winners and calculate those that were losers as well. The next step will be to determine the actual profitability by using the following formula:
Expectancy = (% Profitable trades * Average Profit) – (% Loss Trades * Average Loss)
Most newcomers in the world of online forex trading wouldn’t remain glued to the screens all day. And the forex market has the potential to turn on its head in the blink of an eye. One smart way to minimize unexpected losses is to put in stop-loss orders. This way, your maximum risk gets capped and your capital is only partially exposed with each trade.
Online Forex Trading – Mistakes to avoid
Lack of research
Online forex trading strategies that are formulated without any market research tend to fail eventually. This is a market that you cannot gauge based on your gut feel and emotional state. Entering this market without research is like entering a battlefield without any weapons – a foolhardy idea that will only lead to losses.
Trading without a strategy
Getting into the forex trading market with a ‘will-see-what-will-happen’ approach is a guaranteed losing scenario. This isn’t a world where you can make up your plans as you go along. Having well formed strategies and a staunch approach of following them will ensure you are in control of the situation even in the worst of times. If not, the market wave might, more often than not, end up drowning you.
Online Forex Trading – The smart approach
Using all the above online forex trading tips to formulate your market approach will provide you with enough safeguard against losses and ensure that profitability remains maximised in accordance with the current market conditions. Be sure to keep these in mind.