The foreign exchange Sydney market is a highly volatile and risky market. It is important for new traders to realise this when developing their forex trading plans and trading strategies so as to keep themselves safe from detrimental trades. By acknowledging certain aspects of risk and risk management you will be able to create plans and strategies to benefit you and your forex trading career.
Keep an eye on your trading capital
The first step to take when managing foreign exchange risk is to trade with capital you can afford to lose. Many times beginner and experienced traders ignore the risk of forex trades and believe they will experience a guaranteed profit. However, as all mature forex traders will agree, not all trades can guarantee profit and thus you must not believe the market will not swing against you. If you should engage in behaviour where you are utilising capital you cannot afford to lose, particularly when using leverage, you run a high chance of depleting your account and facing serious financial ruin. It is important to remain level-headed and objective when trading in order to avoid this potential, risky situation.
Always use a stop loss
In order to prevent detrimental losses it is essential you use a stop loss. Stop losses are types of orders that halt any further capital leaving your trading account should you encounter an unexpected non-profitable trade. Stop losses can be considered as a convenient, intelligent and highly beneficial ‘emergency exit’ but only if placed in the correct position. If a stop loss is placed too late there is a high chance that the trader will have lost a large and damaging amount regardless of having put this preventative measure in place.
Stop losses can be used by forex traders who engage in both independent manual trading or utilise the forex automated trading systems. If you choose to use a forex ‘robot’ you will be required to set the stop loss among your trading parameters when setting the robot to trade automatically. It is vitally important you ensure the software is reliable for untrustworthy robots have been known to ignore the stop loss and lose their trader notable amounts of money.
Controlling emotions on the foreign exchange Sydney market
A foreign exchange trader’s greatest enemy is his/her own emotions. In many cases where traders are experiencing profitable trades they will also experience the emotion greed. The majority of these individuals will feel a need to trade larger and more frequent trades in order to gain more money. They will also hold the belief that they will not face any losses for having experienced successive trades luck must be on their side.
As is aforementioned, profitable trades are not guaranteed and all traders will experience at least one detrimental and account depleting trade at some point in their career. Those greedy individuals often experience psychological difficulties when it happens as it is generally due to their greed. In order to avoid this it is best to re-examine a trading plan which will indicate how you should be trading.