it is not a secret that most of the Forex traders sooner or later loose their deposits. The reason for that is very simple – most of the traders take too high risks, in the hope of huge profits. They don’t wish to accept the fact that Forex trading is not about luck and if they were lucky in the beginning, it won’t follow them all the time. If someone tells you that during a month he made $500 out of initial $50, it may be true. Also the truth is that if this trader doesn’t change his trading strategy, he may end up with zero. Every trader has to be prepared to the failure.
One of the main parts of trading strategy is the smart money management. Let’s discuss the risk levels that might be used when opening a trading position. Risk is the amount of % of a current deposit which can be afforded to be lost if your trade reaches the stop loss.
The world’s leading Forex traders strongly advise that the risk level must stay at 2-6% of the initial investment. If you don’t have much trading experience, we recommend you to set up your risk level to no more than 2% only. If the amount of your deposit has been changed, the lot size should be recalculated accordingly based on the rule of 2%. If your investment is small and the Forex trading platform you are using doesn’t allow you to open a trade with a small risk, it makes sense to move to another Forex platform where smaller lots and mini accounts are allowed.
Another main factor in Forex trading is the time frame you choose to trade on. According to the experience and advice of the best traders, you should avoid too frequent transactions. It is almost impossible to predict the prices within a day, especially for beginners. It is difficult and risky to catch the market’s movements during a day.
The best choice would be trading on the daily charts, where each Japanese candle stick develops during a day. Thus you won’t need to spend hours in front of your computer trying to make a few dollars. You will need just few minutes a day to make the analysis of the market and execute the trades. You won’t be nervous and under pressure trading on the daily charts. Believe me trading within a day and scalping requires a strong character and mental health and is not for everyone. Trading on the daily charts doesn’t include high risks and minimizes the chances of making a mistake.