FX Online Trading: How To Make Money Instead Of Losing It
There is a lot of money to be made in FX online trading. Yet most traders lose money when they start. There are many reasons for this. Sometimes the system that a person is following is simply not profitable. Sometimes it is a matter of discipline. Then again emotions may get the better of you, or you may just make a mistake.
The good news is that you can learn to minimize losses and maximize gains. Having a clear plan and knowing how to implement it can do wonders to help you avoid the worst of the loss situations, no matter which system you use.
Your Plan
Successful currency trading requires two things: a profitable system and an effective plan. There are many systems too numerous and complex to list here, so we will assume you are using just one system. The problem is that people often think that the system is enough. It’s not. It is equally important to have a plan for implementing your system.
Your plan should include three things:
1. Your position size. That is the amount that you will invest in each trade. You will probably think of this in terms of lots but it is also worth considering the margin and what percentage of your total funds it represents. The percentage amount will vary depending on the leverage you are using and the level of risk that you feel happy with.
2. Your stop loss level. This will be expressed in pips. But again you should also think it through as a percentage of your funds. Most people would be well advised to set a stop loss so that they never risk more than 2% of their funds on a single trade. If you have a minimal account balance, however, you may have to risk more, otherwise you will find the stop loss is triggered by every little normal fluctuation in the market. Just be aware this opens you up to a bigger risk.
3. Your exit level for a successful trade. This is one thing that many traders do not decide in advance, but they should. Deciding how much profit to take is the best way to maximize your profits in most situations. Do not be tempted to leave funds indefinitely hoping that the trend will keep going your way. Sooner or later it will turn on you and bite hard.
Sticking With Your Plan
There is no point in even having a plan for your FX online trading if you do not keep to it. There are many temptations: you will find voices popping up in your mind suggesting that you deviate from your plan in all different ways.
We just mentioned the temptation to leave your trade open indefinitely when things seem to be going your way. But there are other tempting situations too. For example, when you have just taken a loss, it is tempting to risk more on the next trade to try to recover your position. Don’t do it.
Or perhaps you have not been able to trade in a long time because nothing has met the criteria for your system. Then along comes a situation that almost qualifies – but not quite. Do you take it? No. You must maintain your discipline.
It is also important to avoid distractions while you are trading so that you reduce the risk of making simple errors. When starting out, you would not believe that you could ever do something so stupid as to go long when you meant to go short, or enter the market for the wrong pair, or set your stop loss at 10 times as many pips as you intended. Simple mistakes, but most traders have done this kind of thing at least once in their trading lives. Often it is because concentration slipped: the kids are banging on the door of your den, or the phone is ringing and you are trying to set your position quickly so you can go answer it.
One of the biggest advantages of using a forex robot is that the robot will stick to your plan for you. Provided you get one that will allow you to set up a profitable system, it really will trade for you on autopilot, sticking to your preset rules. You are safe from temptations and distractions when you use a forex robot for your FX online trading.
