Can Reddit offer anything to traders?
What could possibly be the value of advice from an online forum like Reddit? The specific Forex subreddit, not only features success stories but horror stories of forex traders "blowing" their accounts in a myriad of ways. It's like being privy to an extensive trial and error process (most traders experience), without actually putting your own investment on the line.
A further benefit is
that most of the commenters on Reddit are or where active traders and have
experienced the pitfalls and advantages of trading. Subreddits are also
regulated - so sales comments or marketing materials are usually deleted. So, most
of the points you'll find are unbiased, advice by traders for traders.
Where to get the news
ForexLive seems to be Reddit's favorite source of Forex related info. Some other commenters mentioned Twitter as a great source for concise real-time information - a piece of advice we gave in our article about looking beyond technical analysis.
There are many a cautionary tale on the Forex trading subreddit, one that seems to consistently show up is the new trader that decimates their account by overleveraging. If you are unfamiliar with the term it's when a trader uses an ill-advised amount of leverage to open a position. Why ill-advised? Because a very small adverse movement, would close out the trade - or even multiple trades due to margin stop out.
This overlaps with the advice above, overleveraging increases your exposure, also known as risk. Managing this variable when trading, according to most institutional, retail and reddit traders - is key to protecting your investment. This includes using stop loss to set the maximum risk you are comfortable with and attempting to restrict your risk to 1-5% of your total account per trade.
Another interesting point made by the Forex redditors is - in the above vain, stop-loss defines position size, not vice versa. This is frequent reversal made by new traders which focus on their position size and potential gains, instead of their maximum risk.
Revenge Trading - Don't Do It
Impulsiveness when trading is very dangerous. Having a trading strategy and sticking to it is an extremely effective method to manage risk - the inverse on the other hand is an extremely effective method to lose all of your investment.
If you proactively
try to recover your losses immediately after losing, then you are going to be
in a world of pain - or at least your account is. It is very important to detach
emotions from trading.
Greed, fear, anger and pride (which seem like biblical cardinal sins) are in fact emotions that can influence and cause traders to make uninformed decisions.
Of all of the advice on the internet, keeping a trade journal is something that is surprisingly under represented. With all the variables involved having a baseline that you can revert to is extremely valuable.
The military looks at past campaigns for strategy, athletes look at play backs of their past games to avoid their previous mistakes, become more efficient and ultimately better at what they do. What makes you think traders couldn't benefit from that?
Forex trading is all about timing. Markets are their most volatile during opening and overlapping times, after policy changes and announcements. Sometimes you need some time for volatility to normalize and see what trends are emerging, other times volatility is beneficial. But most new traders are eager to trade and trade on impulse, which is never a good idea.
Stick to your plan
Or in trading lingo, stick to your trading strategy. Having a strategy in place covers your risk/reward ratio, your risk management strategy and the types currencies you'd like to trade. A side-note here - you are not married to one strategy and no one strategy is gospel. Those that adapt, survive once said an old British chap named Darwin. The same holds true for traders on the market.
Although there are many different ways to approach trading, and as many different trading theories as there are stars in the sky, one thing that is a given is; knowledge is king. Sometimes that knowledge comes directly from the source - traders like you on Reddit.