The devastating pandemic has caused a surge in online trading worldwide. Millions of people are making money remotely, without employment contracts. Traders are their own bosses. They are free to choose strategies and tools in this gigantic marketplace, where over $6 trillion circulates daily. However, it is not easy to make Forex a steady source of income. Avoid these typical pitfalls.
1. Check Your Middleman
Forex brokerage is a large industry. Not all providers deserve trust. Licensed companies comply with applicable laws and protect users from devastating losses — the latter is known as negative balance protection. When you download app by Olymp Trade, you can be sure your data and money are safe.
The location of the authorizing entity does not have to match your country of residence. Well-established brokers may be licenсed by the Financial Commission, the FCA in the UK, the FSCA in South Africa, and other organizations. Some licences allow them to operate internationally
2. Make the Most of Your Demo
A demo account is your free opportunity to explore the software of the broker. The best providers offer unlimited access or an ample virtual deposit — for example, $10,000 (this is true for Olymp Trade). It is tempting to enter the market straight away, but the move is also reckless — you will only lose your deposit if you venture out unprepared.
3. Do Not Look for a Magic Strategy
Traders can profit from any proven strategy, be it scalping or swing trading, but there is no one-size-fits-all, no recipe for consistent profits. Try popular strategies in the demo mode to see what works for you. Are you into technical trading or fundamentals? How many hours per day can you devote to trading? These are the first questions to ask yourself.
4. Hedge Risks
Whatever you do, the market will still be risky. Your goal is to reduce the size of the potential loss. This should be achieved through careful planning and calculation of stop loss for every trade. Never risk more than 1% of capital per position, either. Finally, wise investors always diversify their portfolios, spreading the risks over a range of unrelated assets.
5. Review Performance
Without regular assessment, it is difficult to evaluate the effectiveness of trading methods. While keeping a journal may seem outdated, it is still a powerful tool. Note down the details of every position, including the entry and exit price, instrument, volatility, motivation for the trade, etc. Look back at your personal stats every week.
Final Tip: Accept Your Mistakes
Do not assume that Forex experts are infallible. They also make mistakes and lose money occasionally. The currency exchange is driven by global factors, and its behaviour is not fully predictable. Take every misstep in stride. It is your opportunity to perfect the strategy and get better at what you do. Nobody can master trading overnight, but those who persevere succeed in the long run.