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Written by Lukman Otunuga, Senior Research Analyst at FXTM
The foreign exchange market is the largest financial market in the world, even larger than the stock market with a daily volume of $6.6 trillion.
When delving into such a liquid and volatile market, it is important to have a game plan and set of rules on place to limit potential losses. At the end of the day, the goal for many traders is to be profitable from trading the markets, and this requires discipline, knowledge and the right psychology among many other factors.
There are many trading tips that could guide a trader, but below are some popular ones for traders who new to the markets.
• It is important to understand the basics of the markets. Do your homework by understanding the trading hours, drivers behind the markets, important trading language etc.
• Discipline is key. Like anything in life, success does not come without discipline. Stick to your strategy, even when the markets may not be in your favor.
• Understanding the importance of risk-reward ratio and accepting losses is a key part of trading. Trading is a numbers game but having a positive risk-reward may go a long way.
• Never underestimate the markets. The markets can remain irrational longer than you can remain solvent. Expect volatility and unexpected movements.
• Pay very close attention to your emotions. Try to avoid trading out of anger or revenge after a losing trade.
• Take breaks when things heat up. Trading requires a lot of mental energy and breaks are helpful. Spending time away from the markets could be beneficial after a tough day.
• Take ownership of your actions and trades. If you are in a losing trade, don’t blame the markets, news or people. Part of the journey in trading is to take full responsibility and understand that you are in control of your own trading.
• Consistency in sticking to an effective trading strategy is key to achieving success in the long term.
• Trading is an ongoing journey that requires continues review. By reviewing past trades, you can learn from your mistakes which may help on your trading journey.
It must be kept in mind that trading the most liquid markets in the world is a numbers game. A long-term view is needed. Sticking to the game plan, understanding the importance of risk-reward and managing your emotions go a long way.
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NOTES TO EDITORS
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The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.
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