Forex Trading Tips to Use During the Crisis
The Forex market has gone through many boom and bust cycles in recent months due to the recent Russian-Ukrainian conflict. While some experienced traders profited greatly from the price swings, others lost a significant portion of their trading capital. We’ll give you some tips on how to trade forex in volatile times and take advantage of swings like a pro.
1. Establish the risk profile: When the market is as volatile as it is today, the first goal is to define your risk tolerance. Although volatility offers huge profit potential, it can also deplete your account. Therefore, it is essential to determine the level of risk you can take. You can minimize your risk by taking smaller positions and using little or no leverage if you are new or experienced but are risk averse. When the market swings in your favor, you’ll make modest profits, and if it doesn’t, you’ll incur small losses. On the other hand, if your positions are correct, you could make a fortune. There is no right or wrong answer here; it all depends on your risk profile.
2. Make plans for the present weather: The next goal is to build a solid Forex risk management plan. It should be based on your personal observation as well as the news and data you collect. With a more versatile market overview, it ensures effective decisions. Beginners often choose well-known tactics used by more successful traders. Unless we are talking about copy trading, this may not be as wonderful a plan as it seems. Otherwise, you should come up with a plan of your own. Keeping a trading journal with notes on successful and unsuccessful trades is good practice. It helps in the evaluation of your actions and timely adjustments needed to control Forex trading risks.
3. Open a Demo/Practice account: A demo account is a great way to learn new skills or test out a strategy in real-time market conditions. It is a risk-free mode in which no real money deposit is required. On the other side, you will have full access to the trading platform including all of its features and capabilities. The best place to start is to open a free demo account with $5000 on the demo balance, which will simulate 100% authentic market conditions on the MT4 trading platform. You can learn how to trade risk-free here, then switch to live trading on the same platform when you’re ready.
4. Focus on trading the main instruments: Although there are many currency pairs, commodities and commodities accessible for forex trading, it is best to stick to the major currency pairs in these times. Even during a crisis, major pairs like USD/EUR, USD/JPY, and USD/GBP have ample liquidity. As a result, establishing and closing positions will not be a problem as demand and supply for the currencies you are trading will always exist. Besides the high liquidity of these pairs, the media, economists and currency experts focus on events in major economies and exchanges during a crisis. As a result, you will always have adequate data to make informed business decisions.
5. Define the risk-reward ratio: Setting an appropriate risk/reward ratio is the only way to counter your losses. It doesn’t matter if you lose a few hundred individual short trades. Everyone is a loser. The question is how much money you will earn over time. Moreover, the risk-reward ratio helps in calculating the value of trades.
6. Check your emotion: Setting a daily limit for yourself is another important tip for trading in times of risk. If you lose money, you need to know when to stop trading so you can review your trades. If you’re making money, you’ll want to know when to quit so you can keep your winnings for the day. Knowing when to stop trading is another sign of a disciplined and mature trader.
Trading can be a tricky thing during a crisis, but if you follow the tips above, it’s safe to say that a disciplined trader can really make a profit and minimize their losses in every trade they make.