If you want to be successful on the foreign exchanges, you need a plan. Best of course, one of the works. The most important requirements are discipline and a high degree of honesty. The aim should not be quick money, but a long-term increase in capital. If security is paramount then more than just good market analysis is needed. It requires a well-thought-out money management. This guidebook shows what investors need to pay particular attention to and how to achieve much better returns with simple means.
To correctly assess risks
Investors should not sit out all the ups and downs of a currency. A major slump can throw the entire portfolio off balance for years to come. Even if it comes in the following years to strong profits, such a price slide can not always compensate.
High losses should therefore be avoided in any case. After all, a pair that drops by 30 percent needs a 43 percent recovery to make up for the loss. High fluctuations therefore become very expensive for the investor. Here comes an old market wisdom to bear: losses must be stopped and profits will continue to run. This applies to every single item contained in the account.
Stop courses with technical tools set
In the case of graphs, stocks , indices , commodities, or currencies, investors often notice particular price levels. At this point, the course changes direction very often. If these areas are undercut, this makes the chart technician eavesdropping. Because in this area many stop courses were placed. Investors sell when the price falls below this mark.
Use trailing stops
The trailing stop is an automatic, permanently traded stop loss order , as it is now offered by most banks. As soon as the value of an index or share rises, the trailing stop is also adjusted upwards. If the desired object sinks, the trailing stop remains unchanged until the index has reached a new high. If the currency price falls below the set line, the securities are sold immediately. The investor does not have to worry about anything. Thus, trailing stops are an important tool in money management.
Be sure to reduce risks
As already mentioned, it is very difficult to compensate for strong price falls. Therefore, in the context of money management, strong loss-makers in the deposit should be avoided at all costs. First of all, however, investors should be aware of the losses they will be able to get over financially throughout the portfolio. Do I become nervous even at a minus of ten percent or can I also take a minus of between 15 and 20 percent.
It should be noted that not every investment behaves the same way. With regard to the price fluctuations, there are clear differences. Therefore, it makes no sense to apply the loss limit established for the entire portfolio to each individual investment. It is better if the risk appetite of the individual parts is represented by their volume.