Nothing comes easy, especially when it is your first time. You will always encounter difficulties along the road and online Forex trading is not an exemption to it especially for beginner traders. This is common due to the high expectation and unrealistic thoughts that almost every new trader has in mind. What they do not know is that trading isn’t a one-night thing. It is totally the opposite as it is a continuous process all throughout the whole trading experience.
Beginners’ Guide to Forex Trading
New traders can always maximize the demo accounts provided by online Forex brokers for an ultimate and risk-free trading experience. The demo account will enable them to explore the online Forex trading world in as much as they can practice trading without losing any of their assets.
Tips that every beginning trader must know.
The Retail Trading Food Chain
For someone who is new in the online Forex trading world, it is very important he knows the ‘what not’ of the industry, including how the industry is mapped out. Why? It is because the Forex industry works and is made up out of the collaborative combination of all traders.
The money that different party manages, be it a hedge fund, investment bank or private trader, is equivalent to the relative weight of the trading party to the market.
Long-term vs. Short term
As a beginning trader, your primary objective should be how you are going to keep your capital as it is with you and not grow it as soon as you start trading. It should be preservation first before profit. Your goal at this stage should be about keeping the risk at a minimal stage or level. This is possible when you use a long-term trading stance.
It is very common for new traders to expect that they will gain profit as soon as they opened a trading account. What they do not realize is that in order to make a profit and be successful, long-term trends should be used like how successful traders do. Successful brokers turn their money into long-term investment by waiting or holding it for weeks, months or years before maximizing it to gain profit. They make their money more of an investment than a lottery. At times, trading is a measure of patience.
Long-term trading stance saves you from spending too much screen time, thus lessening the harmful effects that it bring.
Keep Everything Simple
As a beginner, do not complicate things, but keep them as simple as possible. Moreover, do not put complicated indicators and strategies in your chart especially when you are not familiar with it. Things will just make things hard and less effective.
Research and backtesting are very important especially when you are on the stage of finding out the average performance of the strategy you used. Keeping thing simple at times is hard to achieve, moreover with online trading which is loaded with endless tools and strategies that you can use at any moment you want. With this, you must keep in mind that trading is not about the number of tools that you employed, but it is about how you maximized well a few numbers of tools.
Obviously, Forex trading is an online activity which makes sense that you really have to buy a software whether you are a new or advanced trader. When trading with an online Forex broker, most probably there are Forex trading softwares which you can access for free and you might also be given access to an Expert Advisor (EA) for free too.
While using an EA is great as it might help you along the way, there are also downfalls of it. First, to generate income for a long time is hard for them especially when the market changes every now and then. Second, it is very hard to understand how it works especially when it comes to the technical parts like the codes.
Get to Know What Technical and Fundamental Analysis Is
One of the most important aspects of trading is analysis in as much as charts play a pivotal role be it a short term or long term trading stance. The main tools that you are going to use as a beginning trader are trend lines, indicators, resistance lines, and support lines.
Having a grasp of what analysis is will help you figure out the importance of how market changes from one country to another affect the Forex world.
Trading Accounts Differ from One Another
As someone who is new to trading, you might think that opening a trading account is the most exciting part and there is a high chance that you will only notice the things that you will see first like the minimum initial deposit and spreads. Well, this should be the last things on your list especially when you are planning to trade for a long time. Instead, leverage, execution models and instrument portfolios should be your top priorities when planning to open a trading account.
Generally speaking, it is in the trading platform offered by the broker that will determine if it is suited for a new trader like you or not.
Be Careful in Volatile Markets
Market volatility is very important in order to make your trading activity moving. In as much as it keeps your trading activity moving, it can also completely destroy you when you do not know how to do it properly or when you are not careful enough with it. How does it work? When the market is volatile, the market moves sideways which makes your orders slip in as much as it makes the spreads grow.
When you chose to use volatility analysis, you should always be ready with the risk that comes with it. Everything can possibly happen and change in just a blink which makes it very important that you should be ready to accept whatever the result is.
There is Nothing New in this Industry
Everything you hear, read or watch is not new anymore. It all happened before, and it can happen anytime, thus they are on the news every now and then. That is why you should avoid news trading as possible as you can in order to keep you away from not so new news that will just make you feel shaky even when there is nothing to worry about.
The Trend is Your Friend
As a new trader, trade with what your eyes see and not with what you think. You might be thinking that some things are overvalued which makes you think twice about whether you are going to trade or not, but there is a higher chance that you might not want to trade anymore. Naturally, you will think that it is already overrated.
There is no such thing as overrated when it comes to trading as long as the price is moving up. What you think is of no importance as long as the price is soaring high. In fact, it is the best time to trade when the price is high. Go with the flow and follow the trend.
Market Availability is Not a Problem
For beginners, they might think that Forex trading is full of rainbows and unicorns. They tend to focus on major currency pairs when in fact, there are a lot of opportunities that await them. Such opportunities include stocks, indices, futures, commodities and exotic FX pairs.
The number of markets that you explore greatly depends on you as there are hundreds of markets available for your disposal. Do not stock yourself with just one market or instrument, but explore as much as you can. A diversified market is way better than a limited market.
Make Sure That Everything is Legal and You Are Protected
Most or all Forex brokers are under the regulation of prestigious and respected regulatory bodies. They are urged to follow the strict regulations in order to ensure that their clients are safe and protected. Here are some things to do wider when choosing a Forex broker.
1. You are the one controlling your money – this means that the broker can’t touch your money, not unless you use it for trading. The broker can only use your money when it comes to trading activities and not anything else, thus you can withdraw your balance any time you want.
2. Compensation scheme – most Forex brokers are insured which means that clients will not totally lose all their assets when the broker is bankrupt. The client will still receive an amount as a compensation for what he lost during the course of trading with the firm.
3. Customer Support – always choose a broker who is just one call or message away in case you need help. You will always encounter a problem during trading which makes it very important that you choose a broker who can assist you as soon as they can.
Try Trading with a Demo Account
Online Forex brokers offer a demo account where clients can practice trading. Using demo accounts will enable you to widen your grasp and knowledge on what trading is in as much as it is free from risk. You do not have to worry about losing any of the assets that you have with you. Keep using the demo account until you are confident enough to try live trading for the first time. Demo accounts offer almost the same features as the real trading account which gives you the avenue to practice trading as if you are doing the real thing.
Jot Down Everything
It is very important that you jot down everything especially the important points, mistakes, achievements and the like so that you will know what to do and what to avoid next time. Write everything down be it positive or negative. The positives will motivate you while the negatives will help you grow and develop as a trader.
Keep Calm and Relax
As exciting as it sounds, staying calm and relaxed while trading is very important. When everything seems to fail for the first time, giving up should not be your option. Failures should motivate you to become someone better.
Furthermore, do not be overwhelmed by everything you see and hear, instead, sit back and relax. Failing will always be part of everything which makes it very important that you learn from your failures. Always remember, success does not come in a sweet and savoury way, it comes in a bitter and draining way.