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Australian Financial Services (AFS) Licence 246566

Avoiding and Reducing Risk in Trading

Avoiding/reducing risk when trading

Trade like a technical analyst does. For the best possible results, understanding the fundamentals behind an investment also requires understanding the technical analysis method. When your fundamental and technical signals point in the same direction, you have a good chance of having a successful trade, especially with good money management skills. Use simple support and resistance technical analysis, Fibonacci Retracing and reversal days.

  • Be disciplined;
  • Create a position and understand your reasons for having that position;
  • Establish Stop-Loss and Take-Profit levels;
  • Have realistic expectations;
  • Be patient;

Discipline includes hitting your stops and not following the temptation to stay with a losing position that has gone through your Stop-Loss level.

A good rule of thumb is: In a bull market, be long or neutral – in a bear market, be short or neutral. If you forget this rule and trade against the trend, you will usually cause yourself worries, and frequently, losses.

Never add to a losing position. On the easyMarkets platform, traders can change their trade orders as many times as they wish free of charge, either as a Stop-Loss or as a Take-Profit. The trader can also close the trade manually without a Stop-Loss or Take-Profit order being hit. Many successful traders update their Stop-Loss price in their ‘live’ positions beyond the rate at which they made the trade, so that the worst that can happen is that they get stopped out and still make a profit.

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