Tips And Tricks For Trading Forex Beginners
By Peter Brown
The forex market is ideal for investors and traders interested in building their wealth. The market stays open 24 hours a day for five days a week. Unlike the stock market, there is no possibility for bear and bull market. When one currency falls, another one rises and it is possible to make a profit with rising and falling market. You can only trade currencies through a broker and the regulatory bodies ensure that the brokers follow ethical business practices. Even though the profit potential is huge with the forex market, only a handful of traders is successful. Knowing the science of trading will greatly help you to reduce your losses and increase your profits. Here are 8 Forex trading tips for beginners who want to earn.
1.Set up realistic goals
The volatility of the forex market provides opportunities to make huge profits. However, you should not approach forex trading with an idea to get rich quick. Forex will not turn your $500 investment to $10,000 in six months. Again, this is not impossible if you are an experienced trader. Newbie traders should always approach the market with caution. Trying to win every trade will only lead to emotional trauma. You should set up your goals and understand your needs. Learning to trade takes time and you can’t master it with a few weeks of training. Before starting trading, determine the amount of money you can risk.
2. Choose the right broker
Finding the right broker is the most important step that beginner traders don’t understand. While you may be interested in starting right away, you need to take your time to review the brokers. You should always choose a regulated and licensed broker with flexible trading options. Understand the promotions, bonus, and discounts that your broker has to offer. Choose a broker wisely so that you have complete control over your investment.
3. Determine a trading strategy
When you start trading with a live account, you need to have a trading strategy. Different types of traders use different strategies suitable for their needs. Without an action plan, you will only take lucky guesses which won’t help you for long. You need to be exceptionally disciplined when you trade using real money. Use your demo account to test your trading strategy before using it with a live account. As you gain experience, modify your trading strategy to align with your trading goals.
4. Never ignore stop loss
For a forex broker, the stop loss is the most powerful weapon to minimise the loss. It is a tool that helps you to determine the amount of money you are willing to risk. The stop loss is mentioned in terms of pips and it will help you to get out of unfavourable positions very quickly. Always use stop loss with your trade order to ensure that you don’t wipe out your entire investment. While you start a trade hoping that you would win, the stop loss gives you an opportunity to think about failure. Listing a stop loss before a trade will help you to stay out of emotions. When the trade is in a favourable position, you may be tempted to move the stop loss a little bit further. Always ensure that you never risk too much with a tight stop loss order.
5. Control your emotions
Forex trading is just like gambling because you want to seize the opportunity right away. The fast moving market may force you to think irrationally many times. You may think that the market will gain momentum, but the reality may be different. When you face a winning streak, don’t get too carried away with it. Forex trading is not about luck and a single loss can cancel out a lot of profitable trades. When you deal with a losing streak, don’t be tempted to risk more to gain more. Take a break and revisit your trading action plan. The market will stay open throughout the day and you can always come back to it. Approach trading like a business instead of treating it like a hobby
6. Start slow and proceed with organic gains
In forex trading, you don’t have to invest a large amount of money to make profitable trades. You should always start with a minimum risk capital. Huge leverages can be interesting, but until you learn the intrinsic details, use a lower leverage. You should build your account through organic gains as you make profitable trades. Investing more money in trades don’t guarantee huge profits. Getting in and out of the trade at the right time is the key to executing profitable trades. Even though you can deposit more money into your account, you should wait until your account grows organically. There is no point in increasing your deposit if the profit doesn’t justify the investment.
7. Communicate and learn from other traders
On the internet, you can find numerous books and tools that claim to help you learn forex within a few weeks. You should definitely spend some time learning forex to understand the technical jargon. When it comes to trading, the experience is valuable than text from the books. You will learn many exciting things about the forex market trends if you simply communicate with other traders. Many beginner traders are advised to follow the trades executed by experts in real time. By simply copying trades, you can make a considerable profit and learn to trade at the same time.
8. Use trading tools to your advantage
In the forex trading market, numerous trading tools are available to help you understand the market trend. Charts are very simple to understand once you learn how to read the charts. You should analyse the information quickly to understand the market conditions. Various analysis tools are now available in the market and they present the information visually for beginner traders. Test these analysis tools and choose visual tools suitable for your needs.
Beginner traders should always be very careful with the money invested in trading. This money should be your risk capital and you should never risk the money you have set aside for living expenses. Money management strategies will help you to reduce your loss and you need to stick to your strategy at all times.