How to make money in foreign exchange trading and what precautions should be taken in foreign exchange trading?
The entry threshold of foreign exchange market is low, which is the project pursued by many investors. So how to make money in foreign exchange trading? What mistakes need to be avoided? Let's follow Xiaobian and have a look.
1. If you continue to lose money, don't continue trading
There are two trade statistics to watch closely: profitability and risk return. Your winning rate is the number of transactions you have won, expressed as a percentage. For example, if you win 60 transactions in 100, your profit margin is 60%. Day traders should maintain a profit margin of more than 50%. As a day trader, you want to keep your risk above 1, ideally above 1.25. These statistics show profitable traders. If your profitability is slightly lower and your rewards / risks are slightly higher, or if your rewards / risks are slightly lower but your profitability is slightly higher, you can still make money.
2. Never trade without stop loss
Make stop loss orders for every foreign exchange transaction you make. A stop loss is an offset order that will cause you to withdraw from the transaction if the price is opposite to the amount you specify. Your loss is moderate. Then move on to the next deal.
3. Transactions that never increase losses
An average decline will increase your position because prices will affect you and it is often mistakenly assumed that the trend will reverse. It is a dangerous practice to increase loss trading. The price may be much longer than you expect because your losses will multiply. Instead, trade with the appropriate size of the position and set a stop loss in the transaction. If the price reaches the stop loss, the trade will close at a loss. There is no reason to take greater risks.
4. Don't risk more than you can afford
A key part of the risk management strategy is to determine how much money you are willing to take on each transaction. Ideally, day traders should take 1% or less of capital risk in any single transaction. This means that if the stop loss order results in a trading capital loss of no more than 1%, the stop loss order will be closed. This means that even if you lose multiple transactions in a row, you will only lose a small amount of money. At the same time, if you get 2% or 3% loss in each winning transaction, your loss can be easily recovered.
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