9 Forex trading tips for first-time traders
Forex exchange involves trading currencies with the aim of profiting from the variation in currency prices. It is a lucrative business that you can perform any time of day considering the forex market operates 24/7 5 and ½ days a week.
However, success in the forex trade is not a guarantee but requires one to know how to trade and understand the tricks of ins and outs in the trade. The following comprises some tips you can employ in forex trade to ensure successful trades.
1. Learn the Market
Take the time to educate yourself on matters to do with foreign exchange trade. Take as much time as you require to prep yourself on the trade before commencing the real trade. Get to learn about currency pairs and the elements affecting them.
The internet is a good source of information nowadays. Hence, you can educate yourself on the trade through the online space before you start trading. Forex trade requires operations based on knowledge.
Since the trade involves risking lots of money, you want to be sure of what it is you are doing. Therefore, the best starting point for the trade is learning the market.
2. Generate a Trading Plan and Abide by It
There is a common saying that goes like this, ‘failing to plan is planning to fail’. To a large extent, the saying is true. Before you embark on any particular journey or task, it is important to lay out a plan, which becomes your guide all through.
In a forex trade, it is vital to layout some trading parameters to aid you in the trading process. Develop your trading objectives before you commence the trade. The trading goals or objectives become your guide as to the end that you want to achieve in the trade.
Also, it is important that you lay down your risk appetite level, and the trading approach plus the evaluation gauges you would like to adopt for your trade. Once you have generated your trading plan, ensure that every aspect of your trade falls within your trading plan.
Practise is key if you intend to horn your trading skills. The saying ‘practice makes perfect, is applicable in real life. Practise is the only sure way of perfecting your trading skills. Before you start trading, you should practise the trade through a demo account.
A demo account gives you the opportunity to practise by making and learning from your trading mistakes. You get to indulge in trade without risking your capital. The demo account allows you the chance to put into practise your trading plan.
Hence it gives you the chance to see whether your trading plan will work out with actual trades or not. Also, it allows you to make changes to your trading plan before you can get into actual forex trading.
4. Make Predictions of the Market
What type of trader are you? Are you a fundamental trader or a technical trader? You should be able to distinguish between the two. A fundamental trader relies on news plus additional financial plus political news to make trade decisions.
On the other hand, technical traders utilize technical analysis tools such as Fibonacci and moving averages to make trade decisions. Hence, you should learn the two trading tools and be able to employ them in making predictions pertaining to your trades.
5. Develop Trading Limits
You must be able to operate on set limits while trading. For instance, you should be able to set a limit as to how much risk you are willing to assume in your forex trade. You cannot trade blindly and be involved in every trade in the forex market.
Limit yourself to the amount of money you are willing to lose to avoid getting disappointed at the end of the day. The lack of limitation may make you waste your money in trades that are not forthcoming.
6. Know Where to Halt in The Trading Process
This is where the stop plus limit orders come into play. You may not be having the whole day to sit before a computer to monitor trades. Hence, you can set limits on where your trade should stop with a given loss, and where you want the trade to stop given profit already attained.
7. Avoid Trading with Emotions
Trading with emotions can make you lose so much from the forex trade. Avoid the thing that is commonly referred to as revenge trading, where you think that indulging in a trade that is outside your trading plan, so as to recoup what you have already lost in other trades will work out.
Hence, stick to your trading plan and avoid emotional trades.
8. Maintain It Slow and Stable
Forex trade is not simple, and it does not guarantee immediate returns. You will lose many trades and win few trades to none. However, the lost trades should not be the reason for you to exit the forex market. Instead, you should practise consistency with your trades.
You can educate yourself more on the trade instead of giving up. Horn your trading skills to improve your chances for success in future trades.
9. Pick The Perfect Trading Partner
You ought to be mindful of those you pick as your trading partners in the forex market. Consider their trading fees, execution plus the quality of customer service by the trading partner.
Starting forex trade can be very challenging, especially for beginner traders. However, if you abide by the above tips, then you can be sure of succeeding in the forex trade.