Thinking about trading Forex? Whether you’re in for the thrills of trading, to gain some extra money or to build wealth, make sure you know everything you need to succeed in this vast market.
Here are 6 must-read Forex trading tips for beginners:
1- Learn the basics of Forex trading
You know what they say “knowledge is power”. So, like it or not, before you enter this market, you need to make sure that you gain enough knowledge to understand how things work.
The Forex market is vast, volatile, exciting and challenging all at the same time. So, before you enter it, you must know what to expect. Now, there are many specific things about this market that you can only understand while you start trading. However, it wouldn’t hurt you to ask a few experienced traders to show you how they trade to understand the market better before you join it.
Also, you can find a number of learning materials online that can help you familiarize yourself with the market, the terms used by all traders, and the multiple trading styles and strategies that you can use.
2- Use the power of demo accounts
As mentioned above, the more you know about trading and the Forex market before you actually start putting your money in it, the better the chances are that you will make the best trading decisions. Yet, although knowing the basics of the market is essential until you actually experience trading, it will be pretty hard to understand how trading works.
The good news is that most Forex brokers offer beginners a great opportunity: a demo account. What is a demo account? A demo account is similar to a normal trading account the only difference is the fact that you don’t actually trade for money. Simply put, you get to experience what trading is like, without any risk of losing money.
And, no matter how confident you are in your trading skills, we highly recommend that you test them before you start trading for real money.
3- Find the strategy that suits you
Next, once you know for sure that forex trading is the right choice for you, it is time to set up a strategy and a plan. Simply put, it is the time to decide which type of trader you are.
There are four main forex trading styles including scalping, day trading, swing trading, and position trading.
Scalpers hold onto trades for a maximum of a few minutes because their main goal is to earn small amounts as many times as they can during the time when the market is very active.
Day traders use the strategy of picking aside at the beginning of the day, acting on their bias but never hold the trades overnight.
Swing traders are those traders that prefer holding on trades for several days. These types of traders usually lack the time to monitor their charts throughout the day so they only dedicate a couple of hours to analyze the market during the night to make their next trading decisions.
As for position traders, they are those that hold trades that last for several weeks, months, and even years. These types of traders are those that are not in for small gains but rather for long-term and more substantial gains.
Now, choosing what type of trader you will be is a matter of personal taste, time availability, and trading goals.
4- Learn the psychology of trading
Novice traders often overlook the importance of the psychology of trading when joining the Forex market. And, this often makes them experience some serious loses which sometimes take them off the market before they even start to make some significant trades.
What is the psychology of trading? The psychology of trading refers to the fact that you need to leave all your emotions at the door before you start trading. For example, imagine that you have a very stressful day at work and want to trade overnight. Do you really think that you will be able to make wise and profitable trading decisions? Most likely not because stress and financial decisions never go well together.
Also, traders tend to experience a number of emotions including excitement, failure, greed, sadness, and happiness. Yet, you should never let those emotions dictate your trades because there’s never going to get anything good out of trades made under financial pressure or when you are feeling tired or stressed.
5- Choose the right trading partner
Perhaps one of the most important steps is to choose the right broker. First things first, you need to find a reliable broker because, after all, your money is on the table and you wouldn’t want to be the victim of a scam.
Next, look for a broker with great reviews regarding the offered customer service. Even technology can sometimes stop working properly. So, you may want to work with a broker that can offer you 24/7 support in case there is some problem with your trades or the trading platform.
Last but not least, you need to choose the broker that will offer you the trading tools you need depending on your trading style, strategy, and goals. Most Forex brokers offer the same trading tools and learning materials. however, what you should be paying attention to is the quality of their trading platform. Also, let’s say, for example, that you don’t want to trade traditionally on the Forex market and you prefer to trade currencies as BOs (binary options). In this case, you need to make sure that you choose a broker that offers the tool necessary for Binary trading.
6- Know your limits
One aspect that novice traders often overlook is not setting their trading limits right from the beginning. Trading Forex is often promoted as a great way to build wealth which, sometimes, is true. However, it takes great trading skills, experience, and a little bit of luck to hit the Jackpot. Therefore, it is important to know your financial limits and avoid trading more than you can afford to lose.