Forex has caused major losses for many inexperienced and undisciplined traders over the years. We are sure you don’t want to be among them. Your success in the Forex market depends entirely on your experience and emotional stability, thus we hope that the following tips will help you to understand the market better and become more successful trader.
1. Learn the basics and Practice on Demo accounts
First of all, you need to acquire basic knowledge about financial markets and technical analysis, to understand what is ruling Forex market and how to earn on it. The trader must be able to analyze and predict the market movement and be psychologically prepared for trading.
It makes no sense in trying to develop your skills by trading right away on real accounts. While you are trying to learn the basics, your equity is melting due to inept handling. A lot of new traders try to skip trading on Demo accounts (or trade couple of weeks) and move to real ones very fast. Usually it happens because of impatience or more often greed. Avoiding demo trading also comes from not viewing trading as a business but instead as a get rich quick scheme. Forex trading can be better characterized as a “get rich slow” game. The bottom line with demo trading is that it simply must be done successfully for at least 2-3 months, and if you find your live trading is suffering than stop trading live and go back to demo trading. If you can’t make money on a demo account there is very low possibility of earning on a real one.
2. Choose a Forex Broker carefully
Questions for Broker:
- How reliable is this or that broker? Is he licensed and regulated? What are the reviews of other Forex traders?
- What platform does the broker provide? How good is order execution? How effective is customer support?
- What is minimal deposit? What types of accounts does the broker provide?
- Does this or that broker provide market or instant execution? Does he have a dealing desk?
- What additional services does the broker provide? (analytics, Pamm accounts, VPS, etc.)
Answering to these questions you may make your own rating of brokers. It’s easy. Just check 10-20 brokers according to these parameters and make a list of 5 best ones.
Now let’s have a look at the questions you need to ask yourself before making final decision:
- Would you like to invest in Forex or Stock market?
- How much are you willing to deposit?
- Are you going to trade by yourself or would prefer to have a fund manager?
- Are you satisfied with trading instruments the broker provides, what additional services are you looking for?
After replying to these questions you will clearly understand what broker are you looking for and it will be easier to choose the one among the best 5.
Fore more useful tips on choosing a broker you may read the article: “5 Things To Keep In Mind While Choosing A Forex Broker”
3. Don’t tend to embrace the unembraceable
For a beginner it’s better to choose one market and concentrate all your efforts on it. The most calm market is generally EUR/USD. Others like GBP/USD and USD/JPY are more volatile, experience big fluctuations which on the one hand give possibilities for earning more, but on the other hand increase risks of losing all the funds.
Before choosing a particular pair for trading, investigate its’ history, especially for the last several month. Read carefully the charts, try to understand the trends and regularities and at the same time try to work out a trading strategy based on that.
Once you develop a profitable trading plan, this might seem to set you up to make good profits over time. Unfortunately, this is often not the case.
Perhaps the biggest downfall of a Forex trader armed with a good trading plan is maintaining the discipline required to keep to his plan in the face of emotional responses like fear and greed that arise as the Forex market fluctuates.
Planning your trades and then sticking to your plan is one of the key steps toward becoming a successful Forex trader.
5. Trade within the certain limits
Do not attempt to open too many transactions at one time as you won’t be able to track all of them. It’s almost impossible for a newbie to trade successfully on several markets at one time as they are governed by different independent factors. Limit your risks, even if it leads to limiting the profit. Your primary task now is to learn how not to lose your capital. Start trading with small amounts and low leverage, increasing the balance by getting profits and not by depositing extra money.
You should to have some cash reserve for use in emergency cases. Analysts advise to invest in trading not more than 50% of total equity. Thus, in one transaction you should not invest more than 10% of the available funds. Think about how much of these funds you would agree to lose in case of failure. Set the standard of acceptable risk - preferably no more than 5%.
These are the basic rules each new trader should follow in order to secure himself from losses during first months of trading. Use these advices and always remember: Make profits as a result of your own knowledge and experience!
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