Forex trading can be quite overwhelming for beginners. Understanding how and why a financial market moves can appear complex, especially when you see the charts lots of experts use. But with some education around technical and fundamental analysis, as well as a good idea about how psychology affects your trading, you will be better placed to enter the markets and actually have a positive P/L (profit and loss).
We’ve put together 10 basic tips that will help you succeed in Forex trading:
Take time to learn and practice in the demo account
Most traders make the mistake of investing directly into a real trading account without first taking time to learn how the markets behave and the basic of trading. As a result, they end up making losses.
Like anything, you can’t just become an expert without knowledge or practice so it makes sense to try without having any capital at risk.
Most brokers now offer a demo account so it is worth doing your due diligence on which broker to choose before you start with a demo account. This means that you can practice using a brokers platform that you will then use once you decide to go live, you won’t need to get used to using another platform to execute your trades.
Trading a demo account is as it sounds, you will have no capital at risk and should be used to, one, learn the basics of the platform, two, learn the basics of trading and, three, to test any new strategies you have.
Stick to one strategy and be disciplined
Before starting to trade, you should ensure that you have a trading strategy. A trading strategy is a set of rules that will guide you in placing and closing trades. The most common way of coming up with a trading strategy is by using technical trading indicators.
You should avoid jumping from one trading strategy to another just because it is new. The only reason that can force you to drop a strategy is if the strategy turns to be unprofitable. However, you should understand that there is no perfect strategy; every strategy makes some losses once in a while. You only have to ensure that the losses are less than the profits.
Also, be declined enough to follow the rules of your trading strategy. If the strategy says it is not time to trade yet, be disciplined enough not to place any trade. You should not be too greedy to trade.
Be realistic from the beginning
Most beginners think that they will get rich overnight once they start trading Forex. They forget that in any investment, success comes from hard work and being resilient. The small profits accrue to make huge profits. But if you want to make large profits at once by investing huge amounts at once, remember the higher the investment the larger the risk involved.
You only have to be realistic. Aim for realistic profits per day and don’t give up even if you make some few losses once in a while. Every business has its ups and downs. Actually, you should teach yourself to learn from losing trades so as to avoid making the same mistakes again.
Avoid trading when in doubt
If you ever feel you are in doubt to place any trade, sit still and do nothing. You should only place trades when you are very sure and satisfied that the signals to place the trades are very genuine and real.
Actually, some of the most successful traders in the world make very few trades in a year. They are only disciplined to follow their trading strategies. They only trade when they are completely convinced that a signal is real.
Use risk management strategies
Forex trading is very risky and if you are not careful, you could end up making losses.
One of the best trading practices is to never invest more than you can afford to lose. By investing what you are ready to lose, you will minimize the fear that comes with trading. It will also reduce the greed that arises after losing too heavily.
As a beginner, you should avoid trading on leverage. Trading on leverage can be quite profitable but it is also two-sided. If the markets are too volatile, you end up making larger losses.
You should also avoid trading when the markets are too volatile like during news releases.
Also, learn to use stop loss and take profit levels.
Choose your Forex broker wisely
The choice of a forex broker determines the whole Forex trading experience. Remember the broker is the one that provides you with the trading platform.
There are different forex brokers out there and you should look for one that suits your trading needs. Every broker has a number of trading accounts to cater to the various needs of traders.
However, the most important thing is to choose a regulated broker. This way, you will be able to avoid scammers. When a forex broker is registered and regulated by a reputable regulatory body, you can be sure that the broker offers a safe, fair, and transparent trading environment.
You should also look for a broker with an easy to use trading platform. Don’t go for sophistication.
Look for a trading strategy that suits you as a person
When looking for a trading strategy, remember that what works for your fellow trader may not work for you.
For example, if you are that person who likes trading market news, then a long term trading strategy will not work for you.
You have to look at what interests you most in trading and then try to choose a trading strategy that best suit your practices. Some beginners choose to go down the social trading route when they first start out, it helps teach them and also helps their account balance!
Keep a catalog of your trades
By keeping a record of your trades, you will be able to find out what could have caused a losing trade. The detailed record will assist you when revising your trading strategy.
By looking back at your trading history, you will be able to recognize the mistakes in your trading strategy and help you in refining the strategy.
Always keep learning
Financial markets, especially Forex markets, keep changing and it is important that you keep yourself at bay with the ever-changing conditions. Also, every trading experience should act as a lesson for learning better trading skills.
Lack of learning makes you overwhelmed by the ever-changing markets.
Manage and control your emotions during trading
This is the most important trading tip. You may learn and use all the trading tips but lack of controlling your emotions when trading will make you lose focus in trading.
Most traders find themselves placing trades to revenge a loss they have made or at times get too greedy to keep calm when their trading strategy dictates no trading. Such practices end up causing huge losses.
A forex trader should always be fully aware of the risks involved in Forex and always ensure that they carefully make their trading decisions since every decision has its own repercussion.
Although forex trading is complicated and risky, following the above-outlined tips could prove helpful in being a successful trader.
Also, remember that practice makes perfect. You may not be able to practice all the tips at once but practice slowly by slowly and you will end up mastering the art.
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