Most people view forex trading as a high-risk investment. However, if you employ the right strategies, those risks can be managed. This article will discuss five effective minimum-risk forex trading strategies you can use in Singapore. These strategies are based on sound money management principles and have been proven to be successful in the past.
These strategies are worth considering if you’re looking for a low-risk way to trade forex. Let’s take a closer look at each one of them.
Use a take-profit order
A take-profit is an order you place with your broker to sell a currency pair when it reaches a specific price. In a long trade, this price is above the current market rate. The purpose of a take-profit is to lock in your profits when the market moves in your favour. For example, let’s say that you bought EUR/USD at 1.2000 and placed a take-profit at 1.2100. If the market rises to 1.2100, your broker will automatically sell your position, and you will make a profit of 100 pips.
However, if the market doesn’t rise to 1.2100 and continues to fall, you will not make a profit on your trade.
Use a trailing stop-loss
A trailing stop-loss is an order you place with your broker to sell a currency pair if it falls by a certain amount from its highest price. For example, let’s say that you bought EUR/USD at 1.2000 and placed a trailing stop-loss at 1.1900. If the market falls to 1.1900, your broker will automatically sell your position, and you will incur a loss of 100 pips.
However, if the market doesn’t fall to 1.1900 but continues to rise, your stop-loss will “trail” the market by 100 pips and will only be triggered if the market falls by another 100 pips. This type of order is often used by traders who want to protect their profits while allowing the market to move in their favour.
Use a limit order
A limit order is an order you place with your broker to buy or sell a currency pair at a specific price. This price is usually different from the current market price. For example, let’s say you wanted to buy EUR/USD at 1.2000, but the current market price is 1.1900. If you placed a limit order at 1.2000, your broker would only fill your order if the market rose to 1.2000.
However, if the market continued to fall and never reached 1.2000, your order would not be filled, and you would not incur any losses. Limit orders are often used by traders who want to take advantage of a potential market move but don’t want to risk losing money if the market doesn’t move in their favour.
Use a market order
A market order is an order you place with your broker to buy or sell a currency pair at the current market price. For example, let’s say you wanted to buy EUR/USD, but the current market price is 1.1900. If you placed a market order, your broker would fill your order immediately at 1.1900. Market orders are often used by traders who want to take advantage of a sudden market move or don’t have time to wait for the market to reach its desired price.
Use a stop-limit order
A stop-limit order is an order you place with your broker to buy or sell a currency pair if it reaches a specific price. This price is usually different from the current market price. For example, let’s say you wanted to buy EUR/USD at 1.2000, but the current market price is 1.1900. If you placed a stop-limit order at 1.2000, your broker would only fill your order if the market rose to 1.2000.
However, if the market continued to fall and never reached 1.2000, your order would not be filled, and you would not incur any losses. Stop-limit orders are often used by traders who want to take advantage of a potential market move but don’t want to risk losing money if the market doesn’t move in their favour.
In conclusion
Forex trading can be an excellent way to make some extra money, but it’s important to remember that there is always some risk involved. It is crucial for forex traders to be aware of the risks involved in currency trading and always to use a risk management strategy. Using the stop-loss order, take-profit order, and stop-limit order strategies we’ve outlined in this article, you can minimize your risk while allowing yourself to make a profit.
