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11 Tips Every Forex Trader Should Know Before Making Their First

This is a guest post by Paul Koger. Founder of Foxy Trades day trading blog

Trading currencies in the trillion-dollar-per-day foreign exchange market is an exciting and potentially lucrative endeavor.

But as much riches as it can bestow to aspiring traders and short-term investors, the forex business can also be an unforgiving and unpredictable terrain.

Careless and inexperienced traders can see their accounts being blown off the water in a matter of months, sometimes even weeks.

Overtrading, revenge trading, and unsustainable profit-loss ratios can chip off your account piece by piece over time. Here’s 11 tips you should take note of.

TIP #1 Manage Risk 

The most important tip in this list is to manage thy risk. Without proper risk management measures, protecting your trades from severe monetary losses, you’ll likely suffer the same fate as the rest of the 90 percent of traders who’ve tried and lost fortunes in trading currencies.
11 Tips Every Forex Trader Should Know Before Making Their First Trade
TIP #2 Plan Out Your Trade Before Opening It

A simple yet powerful example of a risk management measure is to map out your entire trade before submitting an order to your broker to buy or sell.

Things to plan out ahead include the stop loss and take profit levels. The stop loss denotes where your broker should automatically close a losing trade while your take profit level indicates where your broker should close a winning position.

TIP #3 Opt for Longer Time Frames

Scalping has the allure of making more money in a shorter span of time, but it also exposes your account to a higher degree of risk. Longer timeframes including hourly, daily, and weekly periods tend to generate more reliable buy and sell signals.

Five minute charts, on the other hand, can be volatile and change direction countless times before eventually heading towards one direction.

TIP #4 Choose Who You Listen To

There’s an abundance of self-proclaimed gurus and pundits of Wall Street and Forex trading that it’s easy to get hooked to all of their sage advice and golden nuggets of wisdom.

Don’t readily absorb and heed all the related information that comes your way.

Choose a professional trader or successful trading author who specializes in the currency pair and strategy you are most interested in.

TIP #5 Avoid The News 

Fundamental news can be confusing and downright unhelpful in your trading. While it’s always good to know what sort of economic news and numbers are about to be released, avoid basing your trade decisions and ideas off of them.

Economic reports that should have bearing to your trades should be limited to interest rate hikes, unemployment/employment numbers, and manufacturing/housing activity.

TIP #6 Take a Routine Break 

Breaks are important to calm your mind from the naturally chaotic and stressful price charts presented on your screen.

Going hours without taking at least 15 minutes of break away from your computer screen can cause stress and disrupt you from making sound investment decisions.

Do something in between your daily trading hours, such as taking a nap, eating a snack, or walking your dog outside.

TIP #7 Set a Schedule to Withdraw Money

Whether it’s a weekly, biweekly, or monthly procedure, withdraw your profits, if any, into your savings or checking account.

By rebalancing to your original account size, you remove the temptation of increasing your position size and over-leveraging, which can lead to larger monetary losses.

For example, if you have $1,000 to trade with, and you come out of the week with $1,100, consider withdrawing the $100 and starting again with $1,000 the following week.

TIP #8 Avoid the Fear of Missing Out

This is a common fallacy in trading and in many aspects of human life that people abbreviate it in books and self-help guides as FOMO. The fear of missing out pushes people to do things and take uncalculated risks.

Don’t be afraid to stay in the sidelines if you don’t understand what price is doing or if there is simply no trades to capitalize on.

Sometimes, it’s more profitable to not trade at all than it is to open one in a volatile time in the market, especially during release of high-impact news.

TIP #9 Pick a Good Broker

You’ll be working with your broker to open and close trades as well as move around money to and from your bank.

Pick a good, reputable one that offers low commissions and spreads and a wide enough selection of currency pairs to trade.

Research your prospects through their official website, outside testimonials and reviews, trader blogs and forums, and financial news outlets.

TIP #10 Have a Mobile Platform Ready

A desktop version of your broker’s platform can suffice for day trading, but if you need to leave your home or office, you need a mobile version of that platform to monitor and control your trades.

When vetting your brokers, make sure they offer a mobile version of their software and tools otherwise it can be constricting to solely trade from your desktop computer.

TIP #11 Treat it like a Marathon, not a Sprint

Marathons are slow but sure to progress, and this is how you should approach your trading venture.

Treat forex trading as a business that you grow continuously over time and not as a get-rich-quick-scheme that will make you a fortune overnight.

Final Thoughts

These 11 forex trading tips should give you a solid starting point in your new found way to (hopefully) generate income.

Follow these tips firmly and you should survive the first few months of your trading career, long enough for you to learn the ropes through firsthand experience.

If you want to test out the waters before risking anything, use a free demo account that emulates a trading environment and gives you access to platforms and tools that you’ll be using later on to trade with real cash.

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