7 Ways to Avoid Losing Money as a Trader

There are different kinds of online trading, including, commodity trading, cryptocurrency trading, futures contracts trading, or even forex trading. 

Forex trading is the most popular and common form of online trading, majorly because it is the most lucrative and highly accessible to traders worldwide. Whatever form of trading a person chooses to embark on, the goal is common -to minimize loss and increase profits.

It is common to see traders acquire losses, especially when one is reckless. This article would list out seven essential things a trader needs to do to avoid acquiring unnecessary loss. 

John C. Maxwell once said, “A wise person learns from his mistakes. A wiser one learns from others’ mistakes…”

Therefore you don’t need to wait to lose money before taking preventive measures. Learn from other traders’ experiences! Talking about preventive measures, let’s get on with it.

How to Avoid Losing Money as a Trader

  • Learn How to Trade

No knowledge is ever a waste. As a trader, gathering knowledge on the scopes of trading is a continuous journey that shouldn’t have an end. The market is ever-changing, so learn to keep up with current information. 

Before trading, it is vital to have a basic understanding of the stock market and economy. It is also crucial for a trader to understand geopolitical and economic factors that affect currencies and exchange rates.

Just as studying historical price action is important, a trader should not forget that current events can substantially impact markets. The amount of correct trading information a trader consumes will help him minimize losses.

  • Look for the right broker

The majority of work done in trading rests solely on the trader. However, the kind of broker a trader uses also matters to avoid falling into scammers’ hands. Experts recommend using only regulated forex or crypto brokers.

If you are a US citizen, ensure the broker you are using is registered with the Commodity Futures Trading Commission [CFTC]. 

Apart from confirming if your broker is regulated, study the broker’s terms and conditions, their available features and see if it’s agreeable with your trading plans.

  • Plan ahead

It is said that he who fails to plan plans to fail. One can never go wrong with planning. To succeed as a trader, you need to have a goal in mind. This plan can include information like rules for risk management when to enter or exit the market and a well-planned trading strategy.

By formulating this trading plan, following it up, and monitoring when to adjust it to match the ever-changing market, a trader will succeed more than one without a goal or plan. 

  • Limit leverage

Leverage offers traders the opportunity to use borrowed money to increase the profits from a trading setup. When appropriately managed, just as leverage gives room for potential growth, it can also increase losses. 

The higher the leverage, the higher the chances of risks. Therefore as a trader, do not get too carried away when using leverage in trade. Learn to limit the amount of leverage when necessary. Before using this helpful tool, try and understand the ratios and percentages and use them with caution.

  • Use a demo account first

Before going live, a trader can use a demo or practice account first; this would give him trading experiences without losing real money. A demo account also gives room for frequent practice to learn trading secrets and skills. Whenever the trader is ready to go live, he should also remember to start small. 

Keep emotion in check

Greed and overconfidence are the kinds of emotions that can cause a trader to make a disastrous trading mistake. You are making profits while trading doesn’t make you a professional trader; the market might be in your favor.

 A trader might be tempted to keep on increasing capital since he has been making profits and end up losing all funds and acquiring huge losses. 

  • Record Trades

A good record of your trading activities, both good and bad, would help you succeed as a trader. When a trader studies such records, he can learn from his mistakes, thereby minimizing his chances of repeating such mistakes and instead, make more profits.

Conclusion

To avoid unnecessary loss, you must gather the right information on trading, find the right broker, and plan your trade accordingly. A trader must also learn to use the right leverage ratio and percentage, practice with a demo account before going live, and avoid emotions like greed and overconfidence.

Finally, a trader that wants to minimize loss would keep track of his trading activities and learn from his mistakes. By following these trading secrets, your trading journey would be a successful one.

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