As you go through your Forex training course, you’ll often encounter the term “stop-loss order.” This small phrase can go a long way in reducing your losses and protecting your profits. It’s important to know about it and how to use it if you want to be successful in the Forex market.

What it does

A stop-loss sets a limit on the amount of loss your commodity can take. If you buy a currency at 1.0030 and you set a stop loss at 1.0000, then the currency will be sold automatically once it reaches that level.

Why it’s necessary

A stop-loss does just what it claims; it puts an end to your loss. Having a stop-loss order in place means that capital loss is kept in check. This leaves more capital in your bank and protects your financial interests. It also allows you more freedom. Few individual traders have the option of monitoring the market non-stop. Putting a stop-loss order on a trade means that if the value drops while you’re not looking, your account won’t suffer unduly.

How to use it

The right amount for a stop-loss depends on your trading style and what you are trading. First, you must now what you can afford to lose. Setting your stop-loss within that limit will ensure that you do not lose too much. Before setting a stop-loss, study the commodity in question. What is the average fluctuation in value? If it usually fluctuates 30 pips within a given week, and you set the stop-loss at 20 then you will force a close on your trade due to normal market change. Your best option is to set the stop-loss outside the normal fluctuation. This, however, will depend on the volume at which you trade and the duration of your trade. The longer the time period for your trade, the more potential there is for fluctuation, even a dip and recovery in values. However, most currency trading does not have an extensive time line, so you’ll want to keep your stop-loss percentages tight.

Learning about stop-loss orders and how they best fit your personal trading style can help you make and keep money in the Forex market.

What to look for in online currency trading software-

In the world of on online currency trading you need to have the right tools. Second to in-depth training is the right trading software, also known as a platform. As trades are done electronically, reliable software is extremely important. A poor choice in software can lead to missed trades and missed profits or, worse yet, losses. It’s worth taking the time now to ensure that you have the software that works best for you.

The first thing to do is shop around. There are countless options out there and most allow you to try a demo account. This gives you an opportunity to try out the software and see what feels right to you. You can compare prices and also search for unbiased reviews on the software and the company to make sure that you’re getting a good deal. While scoping out the possibilities, here are some things to consider:

Support- Any company worth its salt will provide excellent support. They will be prompt and professional in responding to any questions or concerns you may have.

Training materials- In the very least, the company should offer materials about using the platform. Even better would be some tips and information about trading in general. There should also be a Help feature as part of the product for quick questions that you encounter along the way.

Compatibility- Before you purchase or download a program, make sure that it is compatible with your computer and operating system.

Free trial- Some software is free-of-charge with an account, but most will also sell higher-end software with more capabilities. Before you invest your money, make sure that you at least demo the free platform and that you understand what features your money will be buying.

Usability- Reliability and support are all very important. But it is also essential that you personally can use the software. Is the user interface clear? Can you monitor the information easily? Are the charts provided in an easy-to-read format and do they make sense? Make sure that the appearance and features of the software work for you and help rather than hinder your trading.

The majority of decisions in the Forex Market are made based on charts. So for you to succeed, you’ll need to be able to quickly understand and analyze those same charts. This can be a little daunting for those new to the market. Trading courses cover the subject in an in-depth manner, but here’s a little introduction to get you going.

For starters, charts are displayed just as the currency is quoted. EUR/USD means that the base currency is Euros and the US dollar is the quote currency. If the value on the vertical axis is 1.4008 then one Euro can buy 1.4008 dollars. When the line charted is going up then the base currency is growing stronger against the quote currency. If you think the trend will continue, then you’ll want to buy. If you think it will drop and the base currency will weaken, then you’ll want to sell.

Check time frame- Is your chart showing 15 minutes, 1 hour or 1 day? This makes all the difference in analyzing the chart. A trend that seems huge on a 15 minute chart may be rather insignificant for the trend throughout the day. The time frame that you use depends on the type of trading you are doing. If you’re focused on more minute-to-minute trading, like that involved in scalping, you’ll want to look at the smallest time increment possible. If your trades are more long-term, then the 15 minute chart will only be distracting as you are watching your trades over days.

Check the time zones- Most charts are localized and given in your time zone. However, you’ll want to know what time it is in the central trading locations. Openings, closings, and news announcements can affect the trends displayed in the chart and you will want to be able to anticipate these happenings.

Check the Price- The majority of charts give the bid price, which is lower than the ask price. When you sell it is typically a case of what-you-see-is-what-you-get. But when you buy, you’ll be paying the ask price and will need to consider the spread.

Now you know the basics for understanding Forex charts, your next step is to find the right online currency trading course that will give you the tools and information to analyze the data and spot trends so that you can make profitable trading decisions.

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