Forex Trading Risks and Indicators

Forex Trading Risks and Indicators

You need to know and understand the risks of forex trading before you get into online forex trading as your way to make money. In this article, we will cover the risks as well as indicators of forex trading.

Forex Trading Risks

Some of the risks of forex trading include:

Market Risk

This refers to the risk of capital losses caused by rice or market movement that is contrary to your trade. There are several things that can make you more prone to this type of risk. These include:
a)  Lack of knowledge(or education) about the analysis of market movements; either technical analysis or fundamental analysis.
b)  Lack of discipline in implementing the plan as well as implementing the risk management rules, causing a variety of errors in the trade.

Leverage Risk

The risk of capital loss will be much higher by the level of leverage used. The risk worsens if a trader is using a high leverage but not properly managing his or her money. Apart from this, failure to have a plan increases the risk of capital lose. Generally, you should not use more than 100 : 1 leverage.

Psychological Risk

This is another type of risk experienced by currency traders. The risk is often caused by capital losses. Sometimes we are stressed or panic when we suffer heavy losses. Experienced traders have their own ways of handling these problems. After losing several times, a trader’s confidence usually began to decline. To avoid this, it is wise to limit your losses per day. For example, if you lose 5% of your account, then you should take a break for the day and prepare to trade again tomorrow.

How To Handle Risks of Forex Trading

Just like any other businesses, you  cannot completely avoid risks in online forex trading. Learning to accept risks and controlling losses is an important thing to do, just like it is important to know how to manage profits. Take time to learn and find the most suitable time frame and trading style. To handle or decrease the foreign exchange trading risks, have a suitable plan, good money management practice as well as targeted risk management rules. You can learn more about handling risks at FXTradingStrategies.net. The site also provides various training and trading perks, such as Axitrader bonus.

Which is the Best Forex Indicator

There is not a single forex indicator that can be considered “the best”. MACD, RSI, Stochastic, Bollinger Bands, Moving Averages, and Parabolic SAR work in the same manner.  There is no evidence to suggest that one is better than the others.

If you are looking for indicators to find one that will give a definite results,  you are likely to get lost in the technical analysis jungle. You can get lost for years in your quest to find the right indicators and the best setup. If you are always searching the best forex trading indicator, then you are misunderstanding the indicators.

What is the Purpose of Indicators?

forex indicatorThe function / purpose of the indicators is to make you more confident to trade. Indicators should not confuse you and nor enable you predict the future. Indicators help you see movement that has occurred in the past, not what is going to happen. Wherever the price is moving, the indicators follow it.

Well, do you know you can define the market trends without any indicator at all. How can you do this?

How To Define FX Trade Trends

Here are the easy steps you can follow:

The first step is to be able to define the market trend without any indicator at all. You just have to master trend lines (support resistance), candlesticks and chart pattern, also known as price action trading. You can choose the most easy candlesticks type and chart patterns. You do not have to master them all.

When you are able to define the market trend without any indicator, the second step is to strengthen your analysis to increase your confidence in trading.  Your answers to the following questions will decide your profitability: Can you define the market trend, buy or sell area, stop-loss and profit target point without any forex indicator? If the answer is “Yes”, then the profits never get too far.

The best forex indicator is one that is simple and will make you more confident when trading, not confuse you. This means the best indicator may be different from one trader to another.

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