Investing your money is serious business. Protect your capital investment with a solid risk management plan.
MANAGING RISK IS KEY TO SUCCESSFUL TRADING
The objective of trading is either capital growth, or cash flow generation. Seek to preserve your capital learning how to minimize your risk exposure.
BUILD YOUR TRADING DISCIPLINE
Being organized and having a trading routine is one of the critical elements of trading discipline. Advanced traders are often patient and willing to wait for the ideal trade, however when an opportunity does present itself, swift and decisive action is called for.
Recording both winning and losing trades to review and introspect constitutes best practice, and engenders real-life validation of trading strategies. Watch-lists when used effectively, assist traders to selectively focus on potential trades.
The application of a trading strategy is often simplified by allowing price action to unfold and reveal ideal trade setups; rather than chasing prices. This allows traders to initiate positions/exits objectively and deploy their risk management plans dispassionately.
Goal orientation promotes discipline. Many traders remain rational and objective staying out of the market when their weekly monetary targets are achieved. Some also incorporate rules that call for them to stay out of the market if a predetermined number of losing trades are exceeded.
ADOPT A STRATEGIC MINDSET
Besides learning how to trade, being able to think like a strategic trader is an important step to create a tactical plan and execute it flawlessly.
Trading requires a person to have an enhanced degree of self-awareness. A calm, dispassionate and objective mindset is a big positive, one way to achieve this is by having conviction in the trading strategy being employed and trading only within its parameters.
Getting emotional about outcomes, both wins and losses, is undesirable as both of these should ideally be analyzed together as part of the learning process.
LEVERAGE AND MARGIN
The OANDA platform supports margin trading which means you can enter into positions larger than your account balance. Leverage is the reciprocal of margin and its maximum allowance is determined by the regulatory agencies located in the OANDA division you are registered in.
CFD and forex markets move fast, stop loss orders automatically close a trade position to restrict losses. It is important to understand this concept in addition to other order types like trailing stop, and also the risk of slippage.
A trading strategy can offer benefits such as consistency of positive outcomes, and error minimization. An optimal trading strategy reflects the trader’s objective and personal approach.
Fundamental traders watch interest rates, employment reports, and other economic indicators trying to forecast market trends.
Technical analysts track historical prices, and traded volumes in an attempt to identify market trends. They rely on graphs and charts to plot this information and identify repeating patterns as a means to signal future buy and sell opportunities.
Leveraged trading involves high risk since losses can exceed the original investment. A capital management plan is vital to the success and survival of traders with all levels of experience.
Learn risk management concepts to preserve your capital and minimize your risk exposure. Seek to understand how leveraged trading can generate larger profits or larger losses and how multiple open trades can increase your risk of an automatic margin closeout.
Execution speed and numbers are based on the median round trip latency from receipt to response for all Market Order and Trade Close requests executed between January 1st and May 1st 2019 on the OANDA execution platform.
Contracts for Difference (CFDs) or Precious Metals are NOT available to residents of the United States.
MT4 hedging capabilities are NOT available to residents of the United States.
The Commodity Futures Trading Commission (CFTC) limits leverage available to retail forex traders in the United States to 50:1 on major currency pairs and 20:1 for all others. OANDA Asia Pacific offers maximum leverage of 50:1 on FX products and limits to leverage offered on CFDs apply. Maximum leverage for OANDA Canada clients is determined by IIROC and is subject to change. For more information refer to our regulatory and financial compliance section.
This is for general information purposes only - Examples shown are for illustrative purposes and may not reflect current prices from OANDA. It is not investment advice or an inducement to trade. Past history is not an indication of future performance.
Your capital is at risk. Losses can exceed investment. Leverage trading is high risk and not for everyone.