TRADING TIPS -FOREX BEGINNERS
Forex trading is not a simple task as it requires multiple skills. It requires reliable providers, a trade-strategy, and a lot of practice and discipline when managing your trades. Here are some tips when trading Forex.
1. Define your needs and build your trading profile
First of all, you have to decide what type of trader you really are. Are you interesting in intraday trading or in swing trading? Are you willing to devote many hours for trading on a daily basis? What is your appetite for risk? Do you plan to use a Forex robot or receive trading signals from external signal providers? All these questions will define your personal profile.
2. Defining Money Management (MM) -The Trading Triangle
Designing and implementing a money management system is very crucial no matter your trading profile. Money management will protect your funds in the long term and should answer the following questions:
a) What is the portion of your available capital that you are willing to risk?
b) How much risk are you willing to accept?
c) What is the annual portfolio performance that you are targeting?
d) Will you need to withdraw a portion of your trading capital in the next few months?
Forex trading is a risky business, therefore, trade only money you really don't need.
In general, if you are targeting a high performance you must be willing to accept a lot of risks. Check the following triangle, if you push a side of this triangle, the other two sides are widening.
i) If you increase the Profit Performance, you should expect more Risk and/or use a larger Time-Frame
ii) If you reduce the Level of Risk, you should expect a lower Performance and/or use a larger Time-Frame
iii) If you reduce the Time Frame you should expect a lower Performance and/or accept higher levels of Trading Risk
3. Choose the right Forex Broker
In general, these are some important issues when selecting a Forex Broker:
a) Cost of trading which includes Spreads, Commissions, Funding Fees, plus Maintenance Fees (rarely-charged)
b) Reliability and Regulation of the Forex company which can be translated as the Safety of Your Funds
c) Trading Options (like available platforms, funding methods, scalping, hedging, automated trading etc.)
d) Forex Rebates and other promotions (sometimes they can make the difference)
4. Use a Demo Account before you commence trading for real-money
A demo account will make you familiar with a trading platform while it will help you ‘test’ the trading conditions of your Forex broker (spreads, delays, and trading stability). A demo account will also help you evaluate your trading performance in real market conditions (before trading for real money).
5. Focus in a couple of Forex Pairs, not in many
If you are a beginner, it is much better to concentrate on a couple of FX currencies than trying to cover the whole Forex Market. Focusing on particular assets will provide you with better information and increase your potential to produce trading profits in the long-term.
6. Don’t trade hard when you are into unknown territory (start with micro-lot accounts)
Start trading very soft (micro-lot) before you decide to dive into an unknown trading territory, especially if you are not familiar with Forex trading.
7) Minimize the Trading-Leverage and use always a Stop-Loss Order
The absence of a stop-loss order is the most common mistake of a beginner. When you apply leverage without a stop-loss is like driving a highway without having brakes. If you don't like stop-loss orders then don't use trading leverage, it is that simple.
8) Use Trailing-Stops or Adjust Forward your Stop-Loss
When a trade-position becomes highly profitable you must be smart, move your stop-loss forward (or use a trailing-stop) in a way that your profits will be guaranteed.
Trading Tips for Forex Beginners