forex trading

Forex trading is a risky venture, just as in trading in stock, commodities and warrants. However, its potential loss in a single venture can be much less risky than starting a traditional business. This is because you can determine both your account margin size and stop loss for a trade.

However, this does not mean you can be any less cautious and require less preparation work before you actually place a position. Owing to the advancement of technology, currency price data, reports and news are now being distributed rapidly worldwide, very quickly and even free to investors like you. This is why we took a great effort to explain the importance of using all this information in fundamental and technical analysis, which are simply not possible in the traditional business arena.

As you would have already known, many new Forex traders lost their money in the Forex market. There are many ways to improve the odds of your trading success such as:

Important to invest time and effort in fundamental and technical analysis, which you can only get better with time.

Polished your trading skill and experience in a demo account with a chosen trading system.

Build up general Forex trading knowledge by studying Forex trading books and attending Forex trading courses.

Stay away from over-leveraging your account. Learn to survive first then increase profitability later.

Practice proper risk management in a very disciplined manner as part of your trading plan, which is the focus of this chapter.

Subscribe to a good trading signal provider.

Only when you have put all the above components together in place step by step, can your confidence increase. Confidence and experience in turn help to concur with your fear of trading.

We have outlined how you can manage your risks in Forex trading:

Build Up Your Forex Trading Knowledge

Always build up Forex trading knowledge by studying Forex trading books and attending Forex trading courses.

By reading Forex trading books, you get to learn what drives currency rates and price movement. Before the economic news, political statements are out experienced Forex traders usually closed out their positions and just watch the market. They only trade after the market settled down.

During these times, they perform fundamental analysis based on the latest news and reports. Tap on the opinions and forecasts of currency market analysts to help them establish the fundamental currency price levels and trends. Then they perform technical analysis on the currency to help them identify earning opportunities.

To be able to do both competently requires time and training. You can obtain these by attending trading seminars, reading from books, Internet websites, financial newspapers and purchasing DVD video courses. All it takes is commitment and time to learn this Forex trading skill well.

Once you have reached a level of competency, the return from Forex trading can be much more rewarding than your regular day job. This is the same for any other high paying jobs such as doctors, engineering and lawyers. They were properly trained first, followed by more on the job training and undertaking more experience before they actually earn more money than the rest of us.

In short, invest in your own brainpower.

3 Most Important Aspects Of A Forex Brokers

There is already enough marketing campaign telling new Forex traders that getting started in Forex trading is very easy and quick. All you need is a computer with an Internet connection and a funded Forex account with a Forex broker. Then these Forex brokers have free courses that can help you earn money right away.

However, it is much more complicated than that. The three most important questions to ask about choosing a Forex broker are:

Which Forex broker can you trust?

Which broker’s trading platform is good and reliable?

Does your chosen Forex broker trade against you behind your back?

How To Do A Basic Check On Trustworthy Forex Brokers

Choose a Forex broker that is regulated by a financial authority and backed by a bank. Since it is your own money that you are using to invest, you should take up the responsibility of finding out more about your Forex broker.

Beware of some Forex broker’s partner companies that try to sell investment schemes that sound too good to be true. These companies always claimed that they have many clients who had high ROI when investing with them.

For Forex brokers based in the USA, you can always refer to the Commodity Futures Trading Commission (CFTC) or National Futures Association (NFA) for further information of a particular Forex broker.

For those based in the UK, you can refer Financial Services Authority (FSA).

Cyprus Securities And Exchange Commission (CYSEC)

In order to pick up the best FX broker, you can visit the ForexLearningLab Brokers section to review and compare Forex brokers.

Good And Reliable Trading Platform

You can only find out more on this if the Forex broker offers a demo account or at least a trial period.

Do not open a live account right away without trying out the trading platform.

Managing Your Financial Risk Profile

A financial risk profile is a measure of how risk-averse an investor is towards investments. This means to conduct an assessment to determine what types of investment opportunity is most likely to fit an investor’s investment goals.

For the Forex trading beginner, you should already know and bear the following in mind:

You are always trading with money that you can afford to lose. This does not mean that you are prepared to lose this amount of capital for the sake of hands-on educational purposes. You always only fund your trading account with a calculated amount of money that you have safely set aside for Forex trading purposes.

As a Forex trading beginner, you should have another source of income that is already supporting your lifestyle and ability to fund Forex trading.

When you are trading Forex, capital preservation is always more important than insanely quick capital gain. This makes a difference between a gambler and a serious financial investment player.

You are willing to accept above-average risk to generate above-average returns as compared to other financial instruments.

You will at the same time practice money management techniques aside from risk management. This means that you cannot lose more than 1-2% of your trading account should a position hit the stop loss.

Do Not Subscribe to High Leverage

Although leverage is the key to making a significant profit in Forex, setting the right level of leverage in your trading account is critical.

Forex brokers often allow their clients to trade with high leverage (margin). Margin trading refers to the leverage amount given to the traders to make purchases in the FOREX market. Common margins can go up from 20:1 to 200:1 where traders are given the power to buy up to 200 times more than what they can afford in their trading account.

Margin trading is a double edge sword. A $1,000 deposit with a 200:1 margin means that the trader can buy or sell $200,000 worth of currency. It magnifies the profit of the trade and it can even deplete your account just as fast.

Since Forex broker earns from the spread of the currency pair traded, the higher the leverage the more spread earning. Also the bigger the trading position the more spread earning as well.

Hence it would be foolish for beginners to believe that there is little risk involved in Forex trading using higher leverage just because the trader is very confident about the trading system used.

Although the so-called “randomness” of the Forex price movement presents both opportunity and risk, the actual bigger risk is due to humans. Human psychology, emotion, discipline and competency. Even those automated trading software and trading systems were created by humans. Thus you can only blame yourself for putting your account at great risk that you cannot afford.

Setting the right level of leverage in your trading account is key to start reducing the risk exposure. Start low from 10:1 to get your execution of the trading system consistently correct, then slowly increase to 100:1. We would recommend nothing more than that. Of course, with increase account size, you can trade more lots, which would lead to more earning.


Traders cannot risk their capital due to the common mistake of not conducting the technical analysis. Above is the basic understanding you need to know to read charts. If you are looking for a good broker, T1Markets is one of the best brokers that provides trading at minimal costs with favourable trading conditions.  


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