How to Decrease Risk in Forex Trading
As soon as you visit the webpage of a forex broker, you will notice the invitation to risk-free trading, placed in some conspicuous corner of the site, promising cost-free trading experience. That is an enticing offer for most newcomers to trading, and many will not fail to at least test this option before they decide if they should move further with forex trading, or just move on. Demo trading does have its advantages, but it is definitely not a way of establishing if you have the potential for success in forex.
Demo trading is a Very Basic Approach
Demo trading is essentially a computer game. Apart from being free of charge, a forex demo account puts you in control of all the tools available to a real forex trader, and you have the opportunity to prove that you are capable of doing well in trading. Yet demo trading is risk-free, often stress-free, and provides you with unlimited capital. Apart from the huge starting capital that you’re granted, nothing prevents you from blowing up one account and opening another to go on. Demo trading, in short, is a simplistic marketing tool that serves the purposes of the brokers, but its value to the trader is limited by its lack of realism.
A Proper Introduction to Risk Management is Only Possible With a Mini-Account
Since demo trading involves no risks, you can never gain a grasp of risk management by using it. You need to expose yourself to risk in order to proceed from the theoretical to the practical stage in trading. This is only possible in real trading, and the best avenue is the mini-account.
The Transition Can be Made as Soon as the Trader Understands Trading
As soon as you understand what a take-profit order is, how to draw trend-lines/indicators, and how to interact with the software, it is time to promote yourself to the mini-account. Of course, you can also wait until you’re able to profit while trading the demo, but we doubt that this would take a very long time.
One Should Remain a Mini-Trader as Long as Concerns Remain
As long as you have doubts, as long as you’re not satisfied with your results, remain a mini-trader. This may mean that you will not be able to realize huge profits quickly, but much more importantly, it means that you will not suffer large losses either. So stay prudent, and don’t risk much before you’re truly capable of trading successfully.
One can remain a mini-trader for a lifetime while enjoying healthy profits
Indeed, you can remain a mini-trader for a lifetime. There’s nothing wrong with being cautious if you’re benefiting from what you’re doing. As long as you’re not making a loss, you’re doing well, and this is perhaps the most important lesson that must be absorbed mentally by newcomers.
The key thing to remember in order to trade forex – it is all about risk management. If you want to succeed, devote most of your energies to minimizing your losses. If you can succeed in this task with low leverage, and modest market exposure, it is only a matter of time before you begin to make good profits too. And that is when all the hard work pays off, and you reap the benefits of your “sweat and toil”.