Tuesday January 9, 2018 - 14:43:53 GMT
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Become a Forex trader in 2018 – top tips for beginners
January is a tough month financially for everyone, with the spike in household spending over the Christmas and New Year period, the typically longer than usual window between paychecks and the customary malaise in the B2B market. Yet it is also a time for new beginnings and for looking to the future.
Given this combination of factors, it comes as no surprise that this is the time of year when many amateur investors look to dip a tentative toe into the murky waters of Forex trading. If that makes it sound uninviting, it shouldn’t – the wealth of online resources brought to us by the Internet age have gone a long way towards demystifying what was once seen as the domain of investment banks and other large financial institutions and trading houses.
Of course, there is the caveat that a little knowledge can be a dangerous thing. The first timer diving into the world of Forex trading with only a vague idea of what he or she is doing can be like a drunk with a billfold of dollars staggering into Caesar’s Palace and heading for the blackjack tables – and with similarly disastrous results.
Here, we have assembled seven key tips that every new trader should read, re-read and then follow to the letter to help get their burgeoning Forex activities off to a successful start and a lucrative future.
1) Get the basics in place
To start trading, you need a good platform and the right broker. There is certainly no shortage of options as far as both of these are concerned, so do your homework and evaluate all the choices. Make sure you go with a broker who has a sound reputation and is recognized by the FCA, FINRA or a similar regulating body.
2) Study the markets
There is a difference between having a rough idea of what the dollar has been doing by having Bloomberg on your TV as background noise and really studying and understanding the financial markets. Analyze how currency pairs interact, look at their behavior over time and don’t just watch the trajectories and trends, but also get to know the volatility.
3) Practice with Monopoly money
OK, that is an exaggeration, but the beauty of some of those trading apps that we mentioned earlier is that many of them give you the opportunity to practice your trading strategies using a Forex demo account before you start risking your hard-earned money for real. As well as being a fantastic training ground for beginners, a demo account provides more experienced traders with an environment in which to test out new strategies at zero risk.
4) Plan to succeed
If you fail to prepare, you prepare to fail. Benjamin Franklin’s pithy aphorism might be one of the most quoted phrases in history, but that is only because it contains such wisdom, and can be applied to so many situations. It is certainly true for Forex traders. Make a plan, decide on your goals and then start creating a roadmap for success. It is not enough to say your plan is to make money through currency trading – yet that is often about as far as the planning goes for beginners. There are different ways to approach trading, and each has its corresponding measures of risk, return and payback period.
5) Have an emergency exit
One of the most important tools in any trader’s arsenal is the stop loss. See it as an emergency brake, or parachute, if you like. You wouldn’t head out on the freeway in a car with no brakes, and it can be just as reckless to start trading without a stop loss in place. In essence, a stop loss is an advance order that you set when you buy your asset that states upper and/or lower limits at which you will automatically sell. If the stock starts running out of control, you know the stop loss will bring you to safety within these predefined parameters. Don’t trade without it, and resist the temptation to start adjusting it if something unforeseen happens and the value either increases or decreases unexpectedly – that’s exactly what it is there to handle.
6) Play to lose
Trading on the currency markets to lose sounds completely crazy, but you need to be prepared for the fact that any trade could turn out badly. Every trader in the world faces that reality. You can’t win them all, so if you approach each transaction from the perspective that it could go wrong, you will avoid disaster. Don’t risk more than you can afford to lose – even the top traders will never have more than two or three percent of their overall trading budget resting on any one deal.
7) Stay professional
Trading in any financial market is a serious business, and your strategy has to be based on sound analysis and mathematical principles. If you find yourself screaming in anger and tempted to do something completely reckless in order to “turn your luck,” it is time to switch off the laptop, walk away and get your head back in control of your heart before disaster strikes.
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