Forex trading can be a realm that is fraught with risk. For every success story there are ten hard luck stories that follow suit, which means risk management is crucial should you want to find CFD FX trading success. Risk management when it comes CFD FX trading comes in a variety of different forms. The following are three tips that can help you shore up your portfolio and reduce the levels of risk within the trades you make.
Always apply stop loss orders
When it comes to CFD FX trading stop losses are what is going to help protect your account from any unpredicted market movements. Stop losses come in two different variations, Standard and Guaranteed. Guaranteed Stop Loss Orders offer investments the most protection, as it is an order that will close out a position at a level that you predetermine yourself when you put in the stop loss order.
There will be times, no matter how good a trader you are, that the market will catch you off guard. When this happens you need to know that your CFD FX trading positions are protected, stop loss orders are the easiest way to do this.
Understand your market
It should almost go without saying, but the CFD FX trading market can be one that is very unforgiving at times. It can be even more unforgiving should you not understand what is going on with regards to the currencies you’ve purchased. Keep an eye on the nations involved, as they will offer key information with regards to the rise and fall of the currencies within your portfolio. Political unrest, financial instability, and general economy conditions can all affect how your investment fares and should be something you constantly remain aware of. You must also be aware of the fact that you can’t treat every currency pair the same, because the parameters change so your influence as a trader will need to change as well.
Don’t trade blind
So many traders enter the world of forex and operate on instinct alone. This is a foolish way to do business, as it leaves you open to heightened risk. Before you part with your money in a trade, be sure to have a strategy in mind and don’t trade without a long-term plan in mind. Risk management tools should make up a key part of this strategy as well, in order to make sure that you remain dually protected. Remember, if you don’t have a plan or strategy in mind when it comes to a trade, don’t be in a rush to part with your money.
It seems so many entering the market for CFD FX trading purposes do so without thinking to manage risk or develop a game plan. The above tips will allow you to get to grips with CFD FX trading, while making sure that you know exactly what you’re doing when it comes time to click the buy button.
Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment.
Alexander Bowring is a London based writer and a Southampton Solent University Screenwriting graduate. He has worked alongside TV personality and Telegraph feature writer Alison Cork, whilst also having produced content for ITV, This Morning, Canvas8, Who’s Jack, Alison at Home, and Bonallack & Bishop Solicitors. Alexander also has a keen interest in investments.