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Is Being risk-averse the right strategy for you in the forex market?

Before even you land at the forex market, you may get to know that the rate of trader failures is the highest in forex. Some even boldly claim the rate to be higher than 85%

But how is that possible? Is it because of the ignorance of the retail trader? Or is it because of the bullying of them by the authoritative lot? 

The reasons can be easy availability of exposure, absence of proper investor knowledge, or new tools ripping them. Let us take a dive into such variables, and understand how there can be a risk-averse approach to them.

The Prevailing Dogma

You are not in the market to beat it, but to be a part of it. Understanding this fact is critical to all your dealings in the market. You have to recognize the trends and act accordingly. Trying to amass profits with low capital can lead you to face more hiccups than usual. 

‘Beating the market’ mindset has to change, and you as a trader have to be cautious about your deals. Such an approach often drives people to be too aggressive or go against the tide. Both of which are recipes for disaster. 

The prevailing norm is brokers suggesting a large lot size and a higher exposure to the initial amount. It looks like a very lucrative deal on paper to accrue high returns. But in most cases wipes out the trader’s initial capital. The traders step into the market to get rid of debt or make quick cash. Such trade choices make both a far-fetched dream.

Having a requisite capital is crucial in more than one way. You may get a high return with a small investment. However, with every small fluctuation in the market, you may become emotional and take the wrong call. Having an optimum risk-reward ratio on a decent exposure can help safeguard your folio in the long run.

Staring with a small amount is the norm for most shoestring traders. But it can prove to be a disaster if the leverage is set too high in the anticipation of earning a higher return.

Getting Hold Of the Risks

Survival in the forex market is based on your risk management ability. Your gains can get wiped if you do not take the necessary step to mitigate the risk. Your foremost job is not to crunch higher returns but to save what you have. Otherwise, you will not have the capital to experiment in the forex to have a profit or loss.

The counter strategy for this can be to place a stop-loss on the trades. You can move them as and when you earn a sizable profit. You can have reasonable lot sizes based on your capital. You can not be emotional with the trade, once it goes south, you should get out immediately.

The inherent need to earn a higher buck on every dime makes the trade most risky. You need not squeeze every drop out of one single game. Controlling greed is crucial in forex. It is okay to aspire to have a high return, but being cautious is also advisable.

The currencies move every day, so you will have plenty of opportunities. The downside of being too greedy can be dangerous. There are occasions where some have lost their entire fortune because of their wrong trade choices or by scammers. Forex scams by brokers are common.

The brokers may use the high leverage options, not disclose parameters, have withdrawal limits, overspread, signals, or forex tips, spam with lucrative advertisements. Indulging in such deals is always risky. Fund recovery from a forex broker scam would require you to reach out to firms that specialize in such services.

Such firms help you put a strong case based on the type and amount of fraud. They help the victim with the documentation and case filling. The specializations in forex trades help them to find a faster solution to recover the funds.

The Afflicting Practices

The indecisive trades often lead to a lot of anxiety and frustration among the traders. It is advisable to do proper research before setting a forex trade in motion. Your action of going back and forth on the trade will not only cost you a lot of money but will also wipe out your possibilities of a higher return from a single game. 

Trying to pick currency pair turning points is one of the most common mistakes that new traders make in the market. As it pans out, the higher position additions only make it worse. It leads to a higher exposure than anticipated, and therefore, a bigger loss.

We as humans have a tendency not to accept our mistakes in the first go. This attitude in the forex market is why they term these actions as ‘destined for destruction.’ 

At times it is better to accept you are wrong and move on. The decision to cling on to a loss-making trade will only worsen things.

So trade carefully. Creating a winning streak will take time. If you devote more time, you can make it happen. However, it is also important to remember the crucial words for forex trading, .i.e. Trade Cautiously! 

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Written by Virily Editor

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