If trader decide to trade on Forex, it is better to adhere to the following rules.
Rule #1: Don’t take on a lot of leverage, especially if trader’re just learning to trade forex.
In fact, the course usually does not jump much. During the day, the difference is most often hundredths of a percent. So, if trader make deals only for the amount of trader deposit, trader won’t earn much.
That is why forex is traded with leverage. This means that the forex dealer is ready to provide trader with a virtual equivalent of a loan. Real money will not come to trader account, but the leverage will allow trader to increase the amount of the transaction several times. And trader can not be limited only by the money that is on trader deposit.
By law , the maximum leverage a forex dealer can give is 1:50. But such a large limit is available only to qualified investors and those who have already entered into Forex transactions before October 1, 2021.
For new clients without Qualified Investor status, the Forex Dealer calculates the maximum leverage on a daily basis. Its level depends on the statistics of exchange rates for the previous 365 days: the more the cross-rate fluctuated, the less the leverage will be. This is how dealers limit the risks of inexperienced investors so that their losses are not too large and quick. Most often, the leverage is in the range of 1:15 – 1:35.
Let’s say trader deposit is $100. Forex dealer is ready to give trader 1:10 leverage. That is, trader can open a deal for $1000. The forex program will reflect the “purchase” of the currency for $1000. If trader want to open a trade for $3,000, then trader need to take a leverage of 1:30.
Trader can use for the transaction not all of trader deposit, but only part of it. For example, take only $50 out of a $100 deposit and choose a leverage of 1:20. In this case, trader will also be able to make a deal for $1000. And the remaining $50 on the account can be used for another transaction.
If trader guess the rate change, trader can multiply trader profit in this proportion. If trader don’t guess, trader will incur losses in the same ratio.
For example, trader open a deal to “buy” the euro for $1000 with a leverage of 1:10. If the euro rises by $0.2, then trader will earn not $20, but $200. But if trader guess wrong and the euro falls by $0.1 against the dollar, trader will lose $100 – the entire amount of trader deposit.
In other words, trader potential gain, but at the same time the risk of losing money, increases in the same proportion as leverage. Therefore, to begin with, choose a leverage in the range of 1:5–1:15.
Rule #2: Limit trader deposit, the amount trader put into trader trading account with a forex dealer.
After all, trader can lose this amount at any time. It will not work to trade in plus all the time, losses are inevitable. But the forex dealer will not allow trader to lose more than trader have on deposit and go into the red. He will forcefully close the deal.
Let’s say trader deposit is $100. As in the previous example, trader decide to open a trade to “buy” the euro for $5,000. To do this, trader took a leverage of 1:30. But the euro went down against the dollar and fell in price by $0.1 per day.
That is, trader loss could be $300. But the forex dealer will not let trader lose more than trader real trading account, that is, more than $100. As soon as the euro exchange rate against the dollar falls by $0.02 (and trader loss is $100), the forex dealer will immediately close the deal and reset the account.
True, losing the entire amount on the account is also not pleasant enough.
Rule number 3: use a stop loss (stop loss) – automatic exit from the transaction.
Forex programs usually allow trader to limit trader losses on a trade. This option is called a stop loss. This option should be used if trader do not want to lose the entire deposit at once. Stop loss allows trader to automatically close a trade when losses reach the limit trader set.
Suppose trader deposit has grown to $1000. And trader don’t want to lose it all in one bad trade. Then set a stop loss – instruct the forex dealer to close the trade when the loss reaches, for example, $100. This way trader can keep the remaining $900 of trader deposit.
Unfortunately, the stop loss option is not available in all forex programs. If it is not there, trader will either have to risk the entire amount, or each time withdraw money from the Forex dealer’s trading account and leave there only a deposit that trader are not afraid to lose.
Trader decided to try anyway. How to act?
After studying the theory, trader can proceed to the next steps.
Choose a forex dealer
Most importantly, he must have a license from the Bank of Russia .
The official websites of all licensed forex dealers in the Yandex and Mail.ru search engines are marked with a special marking – a check mark in a blue circle.
If there is no Russian license, the risk is not justified by anything. These are either outright scammers with whom trader will definitely lose money, or foreign companies that operate illegally in our country. And in case of problems, trader will have to sue them in the country where they are registered. Read more about forex dealers without a license in the article ” Illegal forex: how not to fall for the bait of scammers “.
In addition to the license, it is worth clarifying a few more points:
• whether it is possible to undergo preliminary training before proceeding to bidding;
• is it easy to install a trading terminal on trader computer or smartphone – a program or a mobile application;
• is there a demo version to understand how the terminal works and test trader strategies;
• whether technical support works well: is there a hotline, online chat, how quickly consultants respond;
• what is the size of the minimum deposit (the probability of losing this amount is very high, so choose options with a small minimum deposit to begin with).
2.Get tested
Before trader start trading, a forex dealer should make sure trader understand the specifics and risks of forex trading. All new clients who do not have Qualified Investor status will be required to undergo free testing.
The test consists of 10 questions . For each, at least four possible answers are given, from which one must be selected. Each correct answer will earn trader from 1 to 3 points depending on the difficulty of the question.
In total, trader need to score at least 13 points out of 15 possible. If trader fail to do so, the forex dealer will not allow trader to trade. Trader can retake the test as many times as trader like.
Forex dealers conduct testing in their offices, on websites or in mobile applications for exchange trading. It is enough to pass the knowledge test for each dealer once, but if trader want to switch to another intermediary, trader will have to pass the test again.
How to prepare for testing, read the article “Where to learn to invest” .
3.Practice on a demo account
Even if trader are well versed in the theory, before risking real money, it is worth trying out different trading strategies on a virtual account.
It is very difficult to predict exchange rates only on the basis of open information about what is happening in different countries. Therefore, to help players, there are programs that analyze the technical indicators of the movement of currencies and help build trading strategies. But the chance of error is still high.
4.Open a real account
Have trader practiced on a demo account? Have trader worked out different strategies that trader learned during the training, have trader chosen a few that suit trader? Now trader can open a real account.
Trader determine the amount on the account yourself, but the forex dealer may have their own restrictions on the size of the minimum deposit. It is better to start with a deposit that trader will not be afraid to lose.
It is not a fact that trader strategy, tested on a demo account, will be just as successful on a real account. Trader will have to spend some more time and money to hone it and develop trader own style. Trader can use several strategies at once, so trader slightly reduce trader risks.
What should Trader do if the forex dealer violated my rights or Trader lost all my money?
There are no guarantees of income in Forex. The money trader deposit with a forex dealer is not government insured. But if trader encounter other problems – for example, a licensed forex dealer executes trader orders not in real time, but with a delay or does not return the deposit at trader request – then contact the Bank of Russia.
If trader have entered into an agreement with a company that does not have a license from the Bank of Russia, and it violates trader rights, write a statement to the police. Before that, collect all the documents that trader have: contracts concluded with a fraudulent intermediary, checks for money transfers, take screenshots from the site.