Strategies to Minimise Risk When Trading
Meta Description: Successful traders know how to manage their risks and control losses. Here are several ways you can minimise risk with your online trading account.
While no trading strategy is entirely free of risk, successful traders know how to manage their risks appropriately and control losses.
Here are several ways you can minimise risk with your online trading account.
1. Control losses with stop loss orders
A stop loss is an order you link to a specific position for the purpose of closing that position and preventing the position from accruing additional losses. A stop loss order on a buy (or long) position is an order to sell and close that position. A stop loss order on a sell (or short) position is an order to buy and close that position.
In other words, a stop loss order limits potential losses by closing a position at a point determined by you. You should decide on a stop loss point before you start trading. At ForexCT, we offer guaranteed stop losses on certain trades to help you minimise risk with your online trading account.
2. Use the appropriate trade size based on your account and level of knowledge
When you start trading, the best strategy is to only trade sizes appropriate for your account balance (known as position sizing) and your level of knowledge. Wait until you’re more familiar with the market, trading instruments and your online trading platform before increasing your trades. You can also set up a free demo trading account to start trading in virtual currency and familiarise yourself with the process.
3. Start small with pair trading
Some traders have the issue of trading and watching too many currency pairs. It’s easy to get overwhelmed with tracking the performance of multiple pairs, so focussing on just one or a few pairs can help you monitor activity more effectively and make smart trading decisions. There are advantages to diversified trading strategies, but only if you have the knowledge and time to stay on top of all your trades.
4. Analyse the market
Knowledge is power when it comes to online trading. Use technical and fundamental analysis regularly to stay informed about the market. Technical analysis typically involves studying past currency pair movements to make predictions about future movements based on historical data. Fundamental analysis involves studying the economic factors and events that may affect markets. At ForexCT, our daily reports give you a comprehensive snapshot of what happened in the global financial markets.
5. Set entry and exit points
Deciding on entry and exit points ahead of time helps reduce the possibility of exiting a trade too late and incurring a loss, or entering a trade too early and being on the wrong side of the market when lagging indicators hit. Set entry and exit points in the ForexCT platform before you start trading to help you decide whether to buy, sell or wait.
Getting started with CFD trading? Join the ForexCT community and get access to our free forex trading beginner’s eBook.