The million-dollar question to which all investors are continually seeking the best possible answer.
Every investor wants their money to work for them, but they don’t want to wake up one day to find out their assets are vanishing because they were too aggressive, didn’t diversify properly, or utilized poor trading habits.
While uncertainty is an inevitability in Forex trading, there are a few ways to maximize profits while minimizing risk. Let’s take a look.
1. Do Your Research
As Benjamin Franklin famously said, “An ounce of prevention is worth a pound of cure.” In the case of Forex, the cure would be for your drastically hurt financial savings if you enter Forex without a proper plan.
While a true understanding of Forex comes from hands-on experience, the best way to obtain such positive rewards is to read what successful Forex investors did in the past and to try to follow their strategies.
There are several tools available that will help you forecast the market, diagnose past trends to maximize future gains, and put your best foot forward. Don’t be averse to trying new software or tools designed to aid you in your investments.
2. Thoroughly Practice with a Demo Account
Demo accounts allow you to perfect your Forex trading strategies without risking your actual monetary funds.
Most brokers offer demo accounts, so there is no reason not to use them. While you might be eager to jump straight into Forex trading with a meager trading strategy, slowing down and practicing on a demo account is the best way to minimize risk and maximize gains.
Not only can you improve your trading chops and build a strong strategy, but you can practice order-entry techniques. Practicing order-entry techniques prevents you from making minor yet egregious mistakes like pressing the wrong button when you mean to open or exit a position.
While it sounds preposterous, such mistakes happen to even experienced traders, but they are minimized by practicing on a demo account.
Market simulators are a great way to get your feet wet and lock down the basics.
3. Learn to Adjust on the Fly
Market volatility is a given.
No set strategy is going to benefit you wholly, and odds are, you’re going to re-assess and adjust on a continual basis to keep your assets earning.
Even if you’re happy with your current growth rate, the most skilled investors never settle.
The best time to learn and strategize is when you’re comfortable. Don’t wait until you’re in crisis mode to decide that your investment strategies aren’t as profitable as you thought they’d be or aren’t profiting at all.
Staying ahead of the curve will ensure that you’re armed with the knowledge to react with confidence when the market takes it’s predictably unpredictable downturns.
4. Keep Your Charts Clean
Your chart shows the live behavior of your currency pair’s exchange rates. While you may be tempted to use all the technical analysis tools your broker provides, keep such tools to a minimum for maximum efficacy.
Using too many tools makes it hard to focus on the data any singular one provides. Worse, some tools may simply add decoration and offer no real insight into the chart’s behavior. Clear up your workspace to make the chart as easy to read as possible.
Cleaning up your chart not only forces you to think minimally in the tools you want to use but forces you to rely on your interpretation and insight, rather than the ones from technology. You become a better investor the more you have to rely on yourself for your investment decisions.
Final Thoughts
Risk comes along with the territory for investors, and when you enter the market, you do so with this common understanding.
That doesn’t mean you’re relegated to limited or sub-optimal returns. By staying organized, planning ahead, and putting the above steps into action, you’ll be better prepared to deal with the unpredictability of the Forex market and (hopefully) maximize your returns.
Best of luck!
