If online traders were asked about the most active and attractive trading place, most would think of the dynamic forex market. Because it is easily accessible and the daily turnover is in trillions. Many beginners think it is easy to make easy money from trading as they see a lot of successful forex traders. But, they don’t realise the struggle behind the fame and end up risking a lot more than they can lose only to get slapped by the harsh reality later on.
Ups and downs are going to happen no matter how prepared you feel as a new forex trader. So, it is better to expect the worst-case scenario rather than just becoming obsessed with the idea of getting the best from the very beginning. But of course, you can take some measures to minimise the potential dangers and improve the chances of getting desired reading results.
I am going to share the same in this blog and I hope you can follow along to mark a successful beginning to your forex trading career.
1. Carefully manage your capital
No one likes losing their funds but the risk is unavoidable in the trading process. But you should not leave things to your luck as forex is not a game of fortune. You have to focus on preserving your capital and prioritise money management. Still, we forge this rule when we get excited about the high leverage offered by brokers. Even though we are exposed to risk, we slack off as it is not our own money. But when you borrow money from your broker, you have to keep sufficient funds to meet the margin level. So, be careful and choose an ideal leverage ratio based on your risk tolerance.
2. Focus on one pair
We might think that it would be best to trade a bunch of currency pairs together to make more profits. But trading will be harder when you try to keep an eye on multiple pairs. Thus, you should be focusing on just one pair in the beginning and first preference should be given to major pairs as they are an easy catch for a beginner. EUR/USD is a pair that I suggest if your trading hours align with the New York and London sessions.
3. Select a suitable strategy
Simple is the best when it comes to the strategy you follow for trading. A complex strategy can create a lot of confusion which is the last thing you want to deal with as a beginner. So, select a strategy that matches your personality and preferences. Backtesting and demo trading can reveal the profit potential of your strategy.
4. Fix your time frame for analysis
Your time frame should be fixed after finalising your trading style. Scalpers spend only a few seconds or minutes in a single trade and hence they watch minute charts. Day traders also prefer minute charts but for a longer duration. Swing traders use hourly charts and position traders pick daily or weekly charts. So, select a time frame that fits your plan and strategy.
5. Set SL for all trades you enter
Setting a stop loss can save you from unwanted losses in any situation. Trading without a stop loss is not a wise move in the forex market which is known for its abrupt shifts. Professional traders always put an SL no matter how high the probability of winning is. So, take a calculated risk and place an SL for all your trades.
6. Find a Reputed broker
In the end, your trading experience will reflect in your trading results. This experience is internal but it also has external components such as the brokerage you choose and the platform you trade on. So, take your time to test different platforms and pick a trusted broker. Make sure they offer solid trading conditions and fast execution of orders. Always test the demo account before going live with a broker.
7. Pay attention to position sizing
The type of lot and number of lots that you decide to buy or sell for a trade determines the result you get in the end. Bigger position size can give you bigger gains but it can also cause a bigger account drawdown when you lose the trade. Thus, you should never risk more than 2% of your capital for a single trade.
8. Figure out favourable entry and exit points
You cannot dismiss the importance of entering/exiting the trades at the best prices. It is not just about the wins/losses but also about the amount you earn or lose in a trade. Always make rational decisions after detailed analysis and use tools like currency calculators to convert the potential gross profit or total risk to your base currency.
9. Keep Learning
If you are losing, learn more to start winning and if you are winning, learn more to keep winning. This is the philosophy to live by for accomplishing your goals as a forex trader. The best student will never say that they have learned it all as they are always on a quest to gain more knowledge and the same is true for the best trader.
10. Analyse your trades
Analytical skills are not only needed for finding trade setups but it is also required for evaluating your own performance as a trader. In forex trading, you don’t have anyone supervising your work and you might end up making costly mistakes while trading alone. So, you need to keep trading for self-assessment and track your progress.
11. Use Your Profits For Trading
Many skilled traders stay stuck in their careers as they are unable to grow their accounts to a bigger scale. This happens because they tend to withdraw all their profits right away when they could have gotten more funds to trade with by simply leaving it in the account to accumulate over time. Hence, if you want to grow your capital without using your savings, you should use your profits for trading.
12. Follow the trend
Following the ongoing trend is the best and safest strategy to trade forex. Many beginners are curious about the possibilities of counter-trend trading. But in my opinion, you should never trade against a trend unless you are sure about a potential reversal. Thus, wait for a while and watch out for signs of a reversal.
13. Keep your emotions in check
It is not possible to think wisely when you are high on emotions. It is very easy to get carried away in emotions while trading. If you have made great profits in a trade, then you will be in the mood to trade more to earn more. Similarly, when you are on a losing streak, then you might feel angry to cover your losses. Any type of emotion is dangerous in trading. It is better to stick to your trading setups because only then, you will be able to achieve profits or limit your losses.
14. Have enough rest
What resting has anything to do with trading success? If this was the first thought that came to your mind, then let me tell you that not getting enough rest stops you from giving your best as a trader. You become tired and restless which is not a winning combo in trading. Our brain is not operating at full potential and it won’t be able to process all the information before making a choice. After all, we as humans have many limitations and we cannot keep trading non-stop like an EA or trading bot. Thus, take breaks from trading and come back when you feel relaxed.
15. Respect the Market
Wouldn’t it be foolish to think that a retail trader can win against the trillion-dollar forex market? But unfortunately, many people believe that they can single-handedly beat the entire currency market. You can see many fake experts promoting such utopian ideas and it is safe to assume that they know nothing about trading. So, stay away from such scammers and respect the market.
In the end, success and failure in forex trading depends on your skills and the knowledge you have in trading psychology. You cannot secure success without a fair share of struggles and sacrifices. If you are determined to win, no one can stop you from achieving success.
