How to Build a Winning Currency Trading Portfolio

It takes more than knowing the market to build a winning currency trading portfolio. It is a highly planned, patient and disciplined approach of risk management. While forex trading can be rewarding and challenging with the right strategy, you can be successful in the long term.

So the first step to building a great portfolio is to have a clear trading plan. A plan that should show how you can hit your trading goals, how much risk you can take and how much you’ll be able to spend on trading per month. That’s why you must also decide which currencies you want to focus on as well. The truth is most traders focus heavily on the major currency pairs, such as EUR/USD, GBP/USD and USD/JPY because they have high liquidity and plenty of trading opportunities to consider. But diversification into emerging market currencies can also be very rewarding if you are cautious.

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Second, understanding risk management is important due to the volatility of currency markets and the fact that Forex trading involves serious risks. You will never ever risk more than you are willing to lose on a single trade. A general rule of thumb is that you shouldn’t have more than 1-2% of your total portfolio on any one position. This prevents big losses and allows you to still play, even when trading doesn’t go as you had hoped. Stop loss orders can additionally be used as a good way to prevent excessive losses should the market move against you, and also to secure your profits as the market moves in your favor.

In fact, choosing a reliable broker is another key to building a successful portfolio. Also, make sure to choose a regulated broker that comes with the necessary tools and resources to help you make sound decisions. With charting software, real time data and educational materials you can have the edge in the fast paced Forex market. As well starting with a demo account allows you to practice before you start spending real money. This will make you easier to adapt to the trading platform and develop winning strategies without risk.

Another important strategy is to diversify by different assets. However, you can decide to include in your portfolio, aside from Forex trading while it is a big market in your portfolio, the commodities, the stocks, and even the bonds. Doing so reduces your exposure to a single market and if there is a downturn in one asset class, you will have stability in another.

Emotions mean a lot to trading. One is fear, one is greed; two emotions that make people make bad decisions. Sometimes you exit a trade too early: fear of loss. Sometimes you are too greedy and take on too much risk. Either one can hurt your trading results. Only stay disciplined and remain to your approach; stick to doing what you are doing nonetheless reassessing your trades based solely on logic and analysis and not emotional impressions.

Forex trading portfolio is a long process to build a winning one. Coming up with the right strategies, but learning from your mistakes and refining your approach takes time. However, with patience, consistency and the ability to manage your risk you stand a better chance of succeeding while partaking in this potentially very exciting world of Forex trading.