Every forex-trading website carries a disclaimer warning traders of the risks associated with margin trading. It is a lucrative way of making money, but the risks associated with margin trading can be catastrophic if things go wrong.

However, traders have ways to mitigate the level of risk associated with trading by applying various trading tactics and strategies. To do this, traders need to use a reliable trading platform that allows them to perform market and technical analysis, while at the same time applying their trading philosophies.

Over the years, trading has become so popular that some traders have made it their full time job. The number of forex trading firms is growing by the day. Currently, there are countless websites talking about forex trading including broker websites, trading platform providers, as well as automated software companies and forex blogs.

Nonetheless, when getting in the business of online trading, many analysts would advise that traders take caution because the dream can end before getting started. Therefore, applying strategies that would enable traders to trade more safely (mitigating the level of risk) is one of the surest ways of making a successful career in forex trading.

As noted, online trading requires the use of a trading platform to facilitate placing and execution of trades along with other resources and tools. MetaTrader 4 is one of the most widely used trading platforms among traders and provides traders with a wide range of tools and resources to help them in implementing various safe trading tactics.

Stop loss/ take profit management

For every trader, these are common features in trading. However, how you use them could determine how much profit you make and the level of potential loss. Some traders take the obvious route by setting equal stop loss and take profit limits. However, the more advanced traders would likely have a different view to using stop loss and take profit limits.

For instance, some traders prefer a wider stop loss level compared to the take profit level. The idea behind this strategy suggests that traders are then able to cash in quickly before the prices drop. On the other hand, they can avoid taking up unnecessary losses by setting up a larger allowance for downside.

Some traders do the exact opposite, by setting up wider take profit margin, in most cases twice as the level set for stop loss margin. The idea behind this strategy implies that traders are willing to cut short the potential losses, while at the same time allowing for more upside potential.

Nonetheless, it is important to note that both strategies work in different situations. For instance, in a downward trending market, the first strategy would work perfectly, while the second one works well in an advancing market.

The idea is that in a downward trending market, there are likely to be a series of lower lows and lower highs. Therefore, after a rebound, traders try to capitalize on the short-term advance by setting leaner take-profit limits. On an upward trending market, traders time for pullbacks by entering the market at the higher high and setting a stop-loss at an anticipated higher low.

Managing trading lots

A lot is a unit of trade. In other forms of business, people call it a batch, or a pack, among other terms. In forex, a lot represents the smallest unit of trade.

It represents 1,000 units of a particular currency pair, commonly denoted as 1k (a micro-lot). Therefore, when a trader selects the number of lots to purchase or sell when placing an order, he or she is ideally quoting in thousands.

The more the number of lots traded, the higher the risk. Therefore, traders looking to cut the level of risk opt to trade in small lots. MetaTrader 4 gives traders an opportunity to trade in 0.01 micro lots, which means lower risk for every trade.

Conclusion

The bottom line is that for risk averse traders, safe trading can be exercised by applying basic tactics such as the ones discussed here. Other traders go the extra mile to apply various automated trading strategies thereby allowing them to cut the risk of loss significantly.

Other commonly used methods include applying trailing stops, which enable traders to take maximum profits based on their trading goals.

Nonetheless, it is always good to remember that no matter how many safe trading tactics you apply, the risk of loss can never be eliminated, but in any case, we all know that no risk means no gain.

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