Forex trading can be a profitable endeavor, but it tends to be so primarily for those who invest time in education before diving into the markets. Time and time again we see that the best traders are the most educated traders. With this in mind, check out the following tips for first-time traders looking to enter the amazing world of Forex trading.
Tip #1 – Know the Markets
Forex traders need to know what makes the markets move in order to make more informed decisions about when and how to trade. For example, a country’s economic standing is the main driving force behind that currency pair’s price. If big economic news is expected to hit, then the market is likely to become volatile. Successful forex traders always stay up to date on the news and are aware of the factors that can affect prices or when they might need to hold off on trading if volatility is on the horizon.
Tip #2 – Have a Plan
Creating your trading plan is one of the first tasks that any new trader should have on their list. Your plan includes your trading strategy, which is very important, but it also deals with who you are as a trader and what goals you have, your evaluation criteria for making trades, how much you want to risk, and your methodology. Without this plan, your trades will likely seem erratic and might not make much sense.
Tip #3 – Practice First!
Have you ever practiced on a demo account before? If you already have a trading account and you haven’t, then you skipped a very important step to beginning the trading process. These accounts are offered by most forex brokers and are completely free, so there’s no excuse not to use one. Demo accounts don’t only allow one to practice without risking real money, but they can also be used to figure out the MT4/MT5 platform, gauge your understanding of how to trade, and whether you’re ready to open a live account, test strategies and indicators, and more.
Tip #4 – Only Risk what you Can Afford to Lose
While we hope that each investment you make into your trading account is a profitable one, this is rarely the case in the world of forex trading. There will be some losses along the way, as this is a fact that even billionaire traders have learned. This is why it’s important to only risk funds that you can afford to lose. If you risk money that you needed to pay bills with or to live off of, then you must think of the ramifications if those funds are lost.
Tip #5 – Research Trading Psychology
You’ve likely heard of the ways that emotions can affect your trades. If not, just think of the ways that anxiety, fear, and stress could negatively affect one’s trades. When you’re feeling these emotions, your head can get cloudy and you don’t make the best decisions, which can result in a loss of money. Even happier emotions like confidence or excitement can cause you to make mistakes when it comes to trading. We could spend all day talking about the psychology behind trading, so you should spend more time researching this topic so that you’ll know if it starts to affect you.
Tip #6 – Stay Consistent
Once you’ve created your trading plan, it is important to stay consistent. Remember that you will have good and bad days when trading, as this is simply part of it. You shouldn’t erratically switch plans every time you lose money, otherwise, you won’t be able to perfect your strategy. Instead, consider keeping a trading journal so that you can see the bigger picture of how your strategy is working along with anything that might need to be changed.
Tip #7 – Choose the Right Broker
With so many forex brokers out there, it’s easy to want to simply choose one and be done with it. Much like with the way that we need to compare car insurance or cable services to get the best deal, we also need to compare multiple brokers as well. This is even more important than the other examples as you are hopefully choosing a broker that you will spend years or decades working with and that will help you make a ton of money. If you don’t put much thought into the process, you could wind up losing way too much money in fees, dealing with poor customer service, or facing other problems down the road.