Is Online Forex Trading Safe – Commerce is the exchange of goods or services between two or more people. So if you needed gas for your car, you would exchange your dollars for gas. In the past, and still, in some societies, trade was done through the exchange of goods, where goods were exchanged for each other.
The transaction went like this: Person A will fix Person B’s broken window in exchange for a basket of apples from Person B’s tree. This is a practical example, easy to manage and daily do business, with easy risk management. To reduce the risk, Person A can ask Person B to show them their apples, to make sure they are safe to eat, before fixing the window. This is how business has been for millennia: a practical, thoughtful human process.
Is Online Forex Trading Safe
Step into the global web now and any unexpected risks can be completely out of control, in part because of the speed at which transactions can occur. In fact, the speed of trading, the instant gratification and the adrenaline rush of making a profit in less than 60 seconds can often trigger the feeling of gambling, which many traders can fall into. Therefore, they may turn to online trading as a form of gambling instead of approaching it as a professional business that requires good trading habits.
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Being an entrepreneur is not a gamble. The difference between gambling and speculation is risk management. In other words, with speculation you have a sort of control over your risk, while you are not gambling. Even a card game like poker can be played with the mind of the player or the mind of the imagination, often with different results.
There are three ways to bet: Martingale, anti-Martingale or speculation. “Imagination” comes from the Latin word
In a Martingale strategy, you double your bet every time you lose, and you hope that the losing streak will eventually end and you will make a good bet, recoup all your losses, and make a small profit.
Using a Martingale counter strategy, you halve your bet every time you lose, but double your bet every time you win. This theory assumes that you can enjoy a winning streak and capitalize accordingly. Obviously, for internet marketers, this is a good choice for both strategies. It is always less risky to take your losses too quickly and add or increase your trading size when you win.
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However, no trades should be made without first evaluating your options, and if this is clearly not possible, no trades should be made at all.
Thus, the first rule of risk management is to calculate the chances of your business succeeding. To do this, you need to understand both fundamental and technical analysis. You will need to understand the dynamics of the market you are trading in and also know where psychological price levels are likely to be trigger points, which the price chart can help you decide.
When you decide to take on the business, the next most important factor is how you manage or deal with risk. Remember that if you can measure risk, in most cases you can manage it.
When consolidating your options, it is important to place a line in the sand, which will be your breakout point if the market is trading at that level. The difference between this threshold and where you enter the market is your risk. Psychologically, you have to accept this risk before you even take the trade. If you can accept the potential loss and it’s okay with you, you may consider continuing to trade. If the losses are too great for you, you should not accept the trade, otherwise you will be too stressed and unable to be objective while your trade continues.
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Since risk is the opposite side of the coin to reward, you need to draw a second line in the sand, i.e. if the market is trading at that time, you will move to the line cutting edge to check your position. This is called slipping your stops. This second line is the price at which you break out even if the market cuts you out at that time. Since you are protected by a stop-even stop, your risk is reduced to zero, as long as the market is liquid and you know that your trade will be executed at this price. Make sure you understand the difference between stop orders, limit orders and market orders.
The next risk factor in the study is fluid. Liquidity means there are enough buyers and sellers at the current price to complete your trade easily and efficiently. In the forex market, volatility, at least in major currencies, is never a problem. This is called market liquidity, and in the forex market, it represents $6.6 trillion in daily trading volume.
However, these payouts are not necessarily available for all brokers and are not the same for all currency pairs. It is really the liquidity of the broker that will affect you as a trader. Unless you are trading directly with a major forex bank, you will likely have to rely on an online broker to maintain your account and execute your trades accordingly. Brokerage risk issues are beyond the scope of this article, but large, well-known and well-funded brokers should fine most retail Internet traders, at least in terms of securing sufficient liquidity to effectively manage your business.
Another aspect of risk is determined by the capital you have. The risk of any business should always be a small percentage of your total capital. A good starting percentage can be 2% of the capital of the existing company. So, for example, if you have $5,000 in your account, the maximum allowable loss should not exceed 2%. With these settings, your maximum loss will be $100 per trade. A 2% loss per trade means you can make mistakes 50 times in a row before deleting your account. It’s an impossible situation if you have a suitable system where you can post a fiction that suits you.
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The way to measure the risk of any business is to use your price chart. This is best illustrated by the following table:
We have already decided that our first sand line (stop loss) will be drawn where we would have cut the position if the market had traded down to this level. The line is set at 1.3534. To give the market some leeway, I would set a stop loss at 1.3530.
A good place to enter the position would be 1.3580, which, for example, is above the last hour high after trying to form a lower triangle. The difference between the entry point and the exit point is therefore 50 pips. If you trade $5,000 in your account, you will limit your losses to 2% of your trading capital, or $100.
Suppose you run a small business. If a small pip equals around $1 and your risk is 50 pips, the more you trade, the more $50 you risk. You can trade one or two small lots and keep your risk between $50 and $100. You shouldn’t trade more than three small lots for example if you don’t want to break your 2% rule.
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The next big threat is power. Leverage is the use of money from the bank or broker instead of using hard currency. The forex market is a very profitable market, as you can deposit $1,000 to trade $100,000. This is a leverage factor of 100:1. A loss in a 100:1 leverage situation equals $10. So if you had 10 mini lots in the trade and lost 50 pips, your loss would be $500, not $50.
However, one of the main advantages of trading in the forex markets is the availability of high leverage. This high power can be achieved because the market is liquid so it is easy to cut the position quickly, therefore it is easy compared to most other markets to manage leveraged positions. Taking advantage of the course cuts two paths. If you are exploited and make a profit, your returns will be maximized quickly but, on the other hand, losses will also destroy your account quickly.
But of all the risks in business, the most difficult risk to manage, and by far the most blamed risk for a trader’s losses, are the bad habits of the trader himself.
Every entrepreneur must take responsibility for their decisions. In business, losses are part of the norm, so the entrepreneur must learn to accept them
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