Tips to Protect Yourself in Forex Futures Trading

Forex futures trading can be very profitable if you know what you are doing, but if you don’t, you can easily lose a lot of money. Just to explain a little, it involves buying specific foreign currency with a contract to dispose it on a future date. You will be hoping that by the time the disposal date arrives, the currency value will gained value and so you can get your mark-up, much the way the stock markets work. Forex futures trading is done using the strongest currencies in the world, the dollar, the Euro and a few others, which will move up and down regularly.

There are many reasons why you can make a loss. Anything happening to the economy that supports that particular currency will bring its value down. In order to protect yourself in forex futures trading, there are some things that you can do:

Tips to Protect Yourself in Forex Futures Trading

  • Don’t Use everyday need expenses money: Don’t use money that you will need to pay off your mortgage. There are few investments in this world that come with a guarantee and this one is like all the rest. It can go bad and you can lose your money.
  • Avoid Overtrading: Forex futures trading can be tricky. You can make a big margin and become overconfident. That might make you want to dive in deeper. Before you do that, think of all the things that can happen to bring a currency down. Always stay level headed to avoid disappointments. More details:
  • Know when to stay, know when to run: It’s simple, if you’re winning, keep reinvesting because the trend might stay that way for a while. Make it a long-term deal. On the other hand, if you lose, get out your money and wait until things pick up again.
  • Don’t be top heavy: To be top heavy means that you probably start out with 10 contracts and when those are traded in and you make a win, you go in for 15. Stay lean. If you start with 10 and do well, buy 50% of those in the next lot. You are cutting your chances of big losses if things go wrong. You might be wondering if you’ll ever make any money this way – you will because you’re reinvesting your profits in fewer contracts.
  • Don’t take on losing positions: This happens a lot in the stock market. You figure that you have a stock that’s doing very well and another one in the market that’s not doing so well but is looking good for the future, so you buy the one that’s not too good because you are thinking of averages. If a currency is losing, don’t take it on with the mentality that the one that’s doing well will cover for it.
  • Never put all your contract in one single trade: The more you spread it, the higher your chances are of recovering if things go wrong.
  • If you hear something, listen: If there is something in the news or from your broker regarding a currency that’s about to fall, get out. Chances are it will and you’ll make losses and still have to pay your broker.
  • Start to take out a portion of profits: If you have traded successfully 2 or 3 times, take some of that money out and put it in another investment to protect yourself in case it all comes tumbling down.
  • Have a broker: They know what they are doing. Do your homework well about how the whole thing works, but let him do the actual trading for you. His total focus is on protecting your investment.
  • Have an objective: For how long do you plan to do forex futures trading? What do you want to get out of it? Just like any other thing that you want to be successful at, have a plan.

These 10 tips will keep you safe while you’re doing forex futures trading.

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