Before any trader starts investing, it is extremely essential to have a sound knowledge about what you will be dealing with. Study and analyze the market, where you want to invest. There is no ‘Rocket science’ involved in financial planning, but it needs to be clearly understood before making any decision. You need to clearly define the rules for the trading game. If you don’t ‘map-out’ the route you will most likely follow, there is a very high chance that you may get lost in reaching your destination. “REST” is a very important financial planning strategy is discussed further below:
One of the most ignored aspect of trading is Risk. Every trader needs to be fully aware of the risks and the ways to mitigate the risk factor. The foremost thing that every trader should consider before jumping into any financial trading is the estimation of risks and how to overcome them. A number of models are available to access and manage the risks, and they should be studies by the trader before time. Every trader jumps into this business with the view to earn maximum profit and reduce the losses that might come in way.
Experience traders always recommend that potential investors should look for opportunities where they have a fixed entry for the trading. Investing in round numbers is generally considered to be positive for the resistance and support. It is assumed that investors with large amount of money are interested to base their entry and exit in round number figures. For example consider numbers like 2.500 or 6.2750. This creates a chance for the market to be inclined at their price levels.
It is very essential to set a fixed stop loss level before starting the trade. The stop loss level needs to be defined when you are placing the order for entry into the trade. The biggest and most commonly mistake made by the investors in that they tend to create a stop loss level in their mind and do not specify it at the entry level . They think that they can alter this value with the shifting market trends. Make note that money cannot be earned with this approach and it is highly disliked by experience traders.
As discussed it is very important to set a stop loss value, similarly it I extremely essential to set the target level before you jump into any trade. Trading is a game, where you cannot allow your emotions to overcome the actual believes about the changing trends of the market. The high vitality of the forex market needs to be considered at each step of the way. It can change drastically due to a number of socio economic and political conditions. For this you need to pre fix your targets and access them thoroughly, so that they seem logical as well. Examine the previous market patterns, as they sometimes tend to repeat after a certain period of time.