Forex for beginners
1. Do your homework
Just because Forex is easy to get to, that doesn’t mean that due diligence can be avoided. Forex study is integral to the success of a trader in the foreign exchange markets. While most of the training comes from real trading and experience, the trader should know everything there is to know about the forex markets, including the geopolitical and economic factors that affect the trader’s preferred currencies. Homework is an ongoing effort as traders must be prepared to adapt to changing market conditions, rules, and world events. Part of this research process involves developing a trading plan – a systematic method for validating and evaluating investments, determining the amount of risk that is or should be accepted, and formulating short-term and long-term investment goals.
2. Find a reputable broker
The forex industry has far less oversight than other markets, so it is ultimately possible to do business with a less-reputable forex broker. Due to concerns about the safety of deposits and the overall integrity of the broker, forex traders should only open an account with a firm that is a member of the National Futures Association (NFA) and is registered with the US Commodity Futures Trading Commission (CFTC) as a futures commission trader. Every country outside of the United States has its own regulatory body with which legal forex brokers must be registered.
Traders should also review each broker’s account offerings, including leverage amounts, commissions and spreads, initial deposits, and account deposit and withdrawal policies. A helpful customer service representative should have all of this information and be able to answer any questions regarding the firm’s services and policies.
3. Use a practice account
Almost all trading platforms come with a practice account, sometimes called a simulated or demo account. These accounts allow traders to place hypothetical trades without a savings account. Perhaps the most important benefit of a practice account is that it allows the trader to become an expert in order entry methods.
Not only does it damage the trading account (and the confidence of the trader), like pressing the wrong button when opening or exiting a position. For example, it is not uncommon for a new trader to accidentally add a losing position instead of closing a trade. Numerous mistakes when entering an order can lead to large, unprotected losing trades. Aside from the devastating financial implications, this situation is incredibly stressful. Practice makes perfect: experiment with order records before betting real money on a line.
$ 5 trillion The
number of daily trades in the global forex market.
4. Keep your charts clean
Once a forex trader has opened an account, it can be tempting to take advantage of all the technical analysis tools offered by the trading platform. While many of these indicators are well suited for foreign exchange markets, it is important to remember that analysis methods must be kept to a minimum in order for them to be effective. Using multiple indicators of the same type – for example, two volatility indicators or two oscillators – can become redundant and even give opposite signals. This should be avoided.
Any analysis technique that is not regularly used to improve trading performance should be removed from the chart. In addition to the tools applied to the diagram, pay attention to the general view of the workspace. The chosen colors, fonts, and types of price bars (lines, candles, rulers, etc.) should create an easy-to-read and interpret chart that allows the trader to more effectively respond to changing market conditions.
5. Protect your trading account
While there is a lot of focus on making money in forex, it is important to learn how to avoid losing money. Proper money management techniques are an essential part of successful trading. Many veteran traders will agree that you can enter a position at any price and still make money – the important thing is how a person exits a trade.
Part of it is knowing when to accept your losses and move on. The consistent use of a protective stop loss (a strategy designed to protect existing profits or prevent further losses with a stop loss or limit order) is an effective way to ensure that losses remain reasonable. Traders may also consider using a maximum daily loss, above which all positions will be closed and no new trades will start until the next trading session. While traders should have plans to limit losses, it is equally important to protect profits. Money management techniques such as the use of trailing stops (a stop order that can be set at a specific percentage of the current market price of a security) can help keep winnings.
6. Start Small
After the trader has done his homework, spent time with his practice account, and developed a trading plan, it may be time to start trading, that is, start trading with real money at stake. No trading practice can accurately simulate real trading. Thus, it is vital to start small.
Factors such as emotion and slippage (the difference between the expected price of a trade and the price at which the trade is actually executed) cannot be fully understood and accounted for until real-time trading begins. In addition, a trading plan that has proven itself to be a champion in testing history or trading practice may actually fail when applied to a live market. By starting small, a trader can evaluate his trading plan and emotions and gain more practice in performing accurate order entry without risking his entire trading account.
7. Use reasonable leverage–Forex for beginners
Forex trading is unique in terms of the amount of leverage that is provided to its participants. One of the reasons Forex is so attractive is that traders have the opportunity to generate potentially large profits with very small investments – sometimes as little as $ 50. When used correctly, leverage provides the potential for growth; however, leverage can also easily increase losses. The trader can control the amount of leverage using the size of the position on the account balance. For example, if a trader has a $ 10,000 account in a forex account, a $ 100,000 position (one standard lot) will use 10: 1 leverage. Although a trader can open a much larger position if he or she maximizes leverage, a smaller position will limit the risk. …
- Keep Good Records
A trading journal is an effective way to learn from both losses and success in trading forex. Keeping a record of trading activity, including dates, instruments, profits, losses, and perhaps most importantly, a trader’s own results and emotions can be incredibly helpful in growing as a successful trader. With a periodic review, the trade journal provides important feedback that makes learning possible.
9. Know the tax impact and treatment
To prepare to pay taxes, it is important to understand the tax implications and how you trade in the Forex market. Consulting with a qualified accountant or tax professional can help avoid any surprises and can help people take advantage of various tax laws such as market value accounting (registering the value of an asset to reflect its current market level). As tax laws change regularly, it is prudent to develop a relationship with a trusted and trusted professional who can guide and manage all tax matters.
10. Treat trading like a business
It is very important to treat forex trading as a business and remember that individual wins and losses do not matter in the short term; what matters is how the trading business will perform over time. Thus, traders should avoid being overly emotional about winning or losing and treat everyone like another day at the office. Like any other business, Forex trading comes with costs, losses, taxes, risks, and uncertainties. In addition, just as small businesses rarely become successful overnight, so, do most forex traders. Planning, setting realistic goals, being organized, and learning from success and failure will help ensure a long and successful career as a forex trader.