Trading forex can sometimes feel intimidating to people who have no prior knowledge about it. Yet millions of investors begin their forex journey each year in the hope of reaching their financial goals without risking their capital. To gain consistent profit, avoid the pitfalls of scams, and become proficient in trading forex, people need a set of guidelines or tips. Hundreds of thousands of potential forex market participants in India turn to the internet to comprehend every single term related to foreign currency exchange. In the following, we have explained some forex trading tips India.
Dos
First, we will review the things that Indian investors should do if they find forex trading interesting. Choosing a forex broker with an open mind is crucial because everything that comes later depends on that decision. The safe way to trade forex starts with selecting a reputed and properly regulated broker that accepts Indian clients.
Select a Regulated Broker
Trading forex in a legally compliant way is the best way to secure your funds. In the majority of cases when investors involve with a shady and unregulated forex broker, they tend to lose most of their capital. Like all financial markets, forex too is full of loopholes, weaknesses, and scammers who harm millions of forex traders worldwide by promising them unbelievable profit.
The Securities and Exchange Board of India (SEBI) provides information regarding forex trading regulations that are followed within the country.
Try a Demo Account
A demo account is a safe method to experience what any particular forex broker has in store for its clients. It is an important feature that one should look out for while choosing a reliable brokerage services provider online. The difference between a demo account and a live account is that the former one is generally free of cost and risk with no real consequences. This type of account is purely meant to practice and getting accustomed to the features, indicators, interest rates, trading platform, leverage, and time frame supported by a broker. The best features of demo accounts are below:
- Involved virtual funds, not real money
- Provide a risk-free virtual trading experience
- Removing the psychological and emotional influence
- Help traders plan and execute trading strategies
Test the risk-free forex.com demo accounts for 90 days.
Proper Risk Management
By risk management, we mean cutting back losses and avoiding trading conditions that are not in the trader’s best interest in terms of profit. Forex is all about knowing when to do what and making that decision at the precise moment to ensure you don’t suffer from a loss. Among many other things, forex traders have to look out for risks associated with trading a particular pair. It is important to follow examples and research to devise a risk management strategy without blindly following forex tips India. Basics of forex risk management are:
- Proper usage of stop losses
- Not holding unnecessarily large positions
- Expecting small yet consistent gains
- Using negative balance protection from top brokers like IC Markets
Try IC Market risk-free trading environment.
Do Your Own Research
Proficiency in forex increases with knowledge collected by any potential investor interested in the forex market. Most of the errors committed by new traders occur due to a lack of understanding as well as experience in trading forex pairs. The good thing about it is that one can understand the logic behind trading know-hows by doing a bit of research for a considerable amount of time. Reading reviews, trading strategy guides, and various other research-based articles can help you fathom the secrets of forex trading. Human errors are found everywhere so it’s not an unusual thing in forex even. To avoid making common mistakes and learn from them, you must broaden your horizon and think like a forex trader.
Visit Investopedia to familiarise yourself with trading knowledge.
Devise a Plan and Follow it
Without a proper plan, any project is bound to meet an early end before an ultimate failure. Investors should think of forex trading as such a project where the goal is to profit from the ever-changing market conditions. Professionals trade the forex market based on a carefully devised “trading plan” which is a strategy to decrease losses and increase profit. Trading forex pairs in a haphazard way, without a clear aim in mind, can have some very disastrous outcomes. Expert recommends traders to take some time out from forex markets and learn as much as they can to prepare a trading style or strategy of their own and follow it.
Avoid Emotional Factor
Emotions are a crucial aspect of human nature that defines every single choice we make in our daily lives. But if you are a potential forex trader, these human emotions can severely harm your portfolio as well as your trading experience. In a spur of emotion, people tend to go with their instincts or gut feeling which is often an uncalculated step. The results of making irrational decisions abruptly can be devastating. It is important to keep in mind that emotions are not a trader’s best friend because emotion-based forex trading is one of the easiest ways to lose all your hard-earned capital in the blink of an eye.
Don’ts
When people discuss forex trading, they tend to emphasise the “do” rather than the “don’ts” in most forex tips India which is harmful. Traders should be aware of the things they need to avoid just as much as knowing stuff that they should utilise for a rewarding forex trading experience.
Trading beyond one’s Risk profile
When people trade any financial instruments, there is a definite risk zone associated with every single trader. The risk profile depends on the amount of initial deposit one uses for trading without risking total personal finances. While trading forex, people should consider their risk profile and comfort zone and try not to extend it. There are no assurances that an overly large trading position would bring a huge amount of profits because it simply enlarges your risk zone.
Use High Leverage without Managing Risks
Leveraged trading is a rewarding opportunity, but only for those who understand its associated risks and are prepared to manage them. Forex traders who have used high leveraged trading for years know that it not only increased profits at the end of each trade but also magnifies the risk involved. New traders who do not have proper risk management strategies in place end up blowing up their accounts in a split second.
You might think you can profit $10,000 by entering a high leveraged position at $1,000 but there is also a possibility that you might lose $10,000 of your trading capital.
Do not Forget Risk-Reward Ratio
Trading forex might sometimes feel like a struggle in the dark when you have no way to calculate your profit and risks. Luckily, there is a metric called the forex risk-reward ratio which helps people determine how much they have risked in the market to gain profit under ideal conditions. This ratio is different for most traders, but the ideal ratio is considered to be 1:3 as per market strategists. It means for every single unit of additional risk, traders should get three units of expected returns.
Copying Other Traders Blindly
Though copytrading is a new and exciting trading style for most forex traders it is not always rewarding to copy another individual’s trades without understanding the logic behind their selections. If you find a successful trader to copy then the outcome could be profitable however the only risk involved with copytrading is market risk. In some countries, brokers do not allow copytrading.
To know more about one of the best copytrading broker, try the eToro demo trial service.