Lets Learn Together: How To Trade FOREX, Cryptocurrencies And Binary Options


A lot of people want to trade the forex market successfully but don't know how to.

In this thread, we will be going through the basics in forex and also you how i enter and close my trades daily/weekly.

I have been trading the forex market for well over 12yrs now and seen a lot of mistakes newbies make causing them to lose their money.

With time, we will go thru everything you need to know, here on this thread and also learn some secret indicators that can enable you enter the market early.

for those on Telegram, join our group chat: @hotfxsignals

Managing your risk in forex trading is the key to become a successful trader and make money. A lot of times, traders lose money not because of lack of skill, but due to poor risk management.

In this article, we will discuss the different methods that are available to minimize risk in forex trading, helping you avoid losses and focus on becoming a consistently profitable forex trader:

Follow a robust trading strategy
It is common knowledge that discipline is one of the critical aspects of forex trading. To establish and maintain that discipline, you need a sound and robust trading strategy. A good trading strategy gives you confidence, and that confidence, in turn, helps you maintain discipline.

There is no one best and most profitable trading strategy, as different trading strategies are suited to different markets and different types of people. So, the trick is to find out which trading strategy best suits you and works out for you. The best way to achieve this is through experimentation without putting too much capital at play.

Remember that a strategy that suits you might be disastrous for someone else, and it is therefore important to find the right fit.

Plan every trade
Planning is a vital factor in differentiating success from failure, especially in forex trading. A phrase commonly heard from successful traders is “plan the trade and trade the plan.” This is a quote around which you should base your trading practices. \

A trading plan is essential in the sense that it allows you to perform a pre-trade analysis, which enables you to set an appropriate take profit and stop-loss order for each trade. Through planning, you can also set time limits on your trades, so that the trade is closed out in case the market does not perform as expected within a particular period.

Limit risk on each trade to 2%
A lot of professionals and experts in trading vouch for the 2% rule. By adhering to this rule, you will still have enough capital to stay in the game despite a drawdown period. By not following this rule, there are chances that you might lose ridiculous percentages of your account, even up to 85% or 90% of your account!

Many traders ignore the damaging effects of a significant drawdown on a recovery. Remember that for instance a 20% drawdown would require a 25% return to recover to break-even, and a 50% drawdown would require a 100% return to recover breakeven!

Don’t overtrade – Schedule your trading hours
Tempting as it might be to trade all the time, overtrading often leads to disaster. It is imperative for a trader to determine the reasons for trading, and analyse to see whether these reasons are logical and not just the result of gut feelings or the need to be part of the action.

The key here is reasoning, which should merge perfectly with the overall trading strategy. A tool that you can utilize to avoid overtrading is to schedule your trading hours, and only trade within the time you have designated for yourself.

Following

What is forex trading?
Forex trading, also called currency trading, is the trading of currencies. Unlike stocks, where one trades based on the value of a single underlying instrument, in forex trading currencies are traded against each other, in pairs.

In simple words, you buy the currency that you believe is going to appreciate or rise in value.

As an example, take Naira-dollar as a currency pair. Here, Naira is the base currency while the US dollar is the quote currency. Base currency represents how much of a quote currency is required to get one unit of base currency.

Suppose you expect the Naira to appreciate in the near future, you would then buy Naira-dollar, which means you buy the Naira and sell the dollar simultaneously. If, as expected, the Naira appreciates in future against the dollar, you will close the position by selling the Naira-dollar pair, which means selling the Naira and buying the dollar back, profiting in the process.

What exactly drives the currency prices?
Currency prices are driven by country’s economic factors such as employment index, inflation, economic growth rates, interest rates, monetary policy, unemployment and so on. Moreover, external factors such as wars and the political environment also influence currency movements, since they affect market sentiments.

For example, Naira-dollar may decrease if there is a sharp decrease in the employment numbers in Nigeria as this will be an indicator of currency’s economic environment. The Naira could decrease due to market sentiment from this news, assuming the dollar value remains the same.

It is important for an investor to have the right knowledge to judge the affect of a certain event on the price of a certain currency pair.

Retail forex is risky, sudden market fluctuations can wipe out your investment. It’s essential that you invest with discipline, proper risk management and only with regulated brokers

How can you get started?
It is important to choose a reputed broker to trade. When choosing a broker, one must make sure to choose a broker that is licensed and regulated under tier 1 regulations.

Compliance to regulations allows brokers in the jurisdiction to operate with transparency and accountability, and protects the interests of investors. It will ensure the grievance redressal is as per the law of the country and limits the chance of getting scammed. Regulations ensure security is in place for the money deposited in the broker’s platform, and the broker is liable for moving the money without your approval.

Why do most traders lose?
It is important for investors to be aware that most forex traders lose money.

Forex markets are very volatile. And for retail traders, foreign-exchange fluctuations can be overwhelming and can wipe out their portfolio within seconds. As the fluctuations are driven by a range of global events, keeping track of everything around the clock is almost impossible. Retail traders lack the resources and access to information that global financial institutions possess to protect themselves.

Also, leverage offered by retail forex brokerages often ends up inflicting more pain. Let's say, a trader uses a 100x leverage on offer, just by making a small deposit, say 100, a retail investor can take a position of N100,000 Naira . With a position size like that, profits may come quickly, but a few pip (percentage in point) moves against you can wipe out your entire trading account, and eventually will if you do not know what you are doing.

Finally, research in psychology and human behaviour has shown that humans are not fit for trading, and they are hard-wired to fail because of behavioural biases. Many biases like the bandwagon effect, herding, information bias, overconfidence and so on work against humans in trading, hence it is very important to develop discipline when you trade.

But can you make money with forex trading?
For retail traders, forex is risky and the odds are stacked against them. It is essential that would-be traders do not invest any money or invest only the amount they can afford to lose. But there are a few who make money consistently out of forex.

As always, experience is the best teacher. To become good at trading, it is important to cultivate discipline and implement effective risk-management principles. Remember, you should stay in the game longer to have any chance of winning it.

Knowledge is an important first step to becoming a good trader. Invest time in educational resources that some brokers offer. Learn along the way. Do not take any leverage until you are clear on various drivers of price movements. Understand that the market can go against you any time without your knowledge, and protect yourself at all costs. Be prepared to lose, ensure losses are small and win big each time you win.

Develop your own strategy and stick to it. Keep refining it from time to time by making small changes and adapt.