Every day, traders trade more than 3 trillion dollars in the Forex market. The Forex market trading volume exceeds global equity trading by 25 times. Are you considering trading Forex?
If you haven’t, there’s no better day than today. Maybe you have but you don’t know how to become a successful Forex trader. Not sure how?
We’ve you covered. We’ll discuss the essentials of how to trade Forex and become a member of the elite league of successful forex traders.
Here are 10 must-know forex trading tips to become a top dog currency trader in no time
Define Your Trading Style, Then Discover How to Trade Forex
Every investor gets into trading for a reason. You may want to save for your retirement or diversify your portfolio. If this isn’t your first rodeo, you may think currency trading works the same as trading stocks.
Yet, that’s far from the truth. Before trading Forex, you must learn as much as you can about the market. During your research, you’ll be able to define your trading style.
- Are you planning on placing trades on a schedule?
- How much can you risk?
Your risk profile will be pivotal in defining your trading style. Keep in mind that your style and risk profile must match your investment goals. If you want to earn passive income or save for retirement, you should consider a conservative trading strategy.
Research and Find the Right Broker
You may want to start trading right away. But, before getting your feet wet, you must find the right broker. Make sure your broker is trustworthy.
It’s recommended to take a look at their customer reviews. What are the features of the platform? Do they fit your trading style?
Does your broker offer customer service? In contrast with other markets, Forex is a 24-hour market so customer service access is a must for any trading platform.
Open a Demo Account to Sharpen Your Skills
Forex trading doesn’t work like other investments. Researching currency pairs is half the game. You must learn when to close your position or keep betting on your currency pair.
To develop this skill, you should open a demo account. You will use the fake money on your demo account to practice and master the basics of Forex trading.
Some of the basics you will learn are lot sizes you can trade, how to place a stop and limit order, among other essential Forex trading basics.
Open an Account That Fits Your Trading Needs
Besides finding the right broker, you must choose the best account package that fits your investment objectives. Can you automate your trades? Since the Forex market is a 24-hour market, you should consider an account that provides the option to automate your trades later on.
As a newbie, you should consider a broker that provides signal services. These services provide trades you can place to grow your account.
Does the broker offer no deposit bonuses? If it’s the first time you hear about bonuses, you should check this article to read more about some brokers that offer this option.
Develop Your Trading Strategy and Stick to It
Like in any investment, you must develop your trading strategy. In Forex, it refers to consider position sizing, exit trade strategy, among other trading essentials.
Before placing a trade, you must have a game plan. You place your trade but, what are you going to do if your losses pile up? How are you going to exit your position?
Are you going to place a market or stop order? How do you plan to react to a market crash? These are some of the questions that can guide your trading strategy plan.
Once you develop your strategy, you must stick to it. Remember in all investing, you play the long game of achieving your investment goals.
Start Small and Work Your Way Toward Greatness
If you were bitten by the Forex trading bug, you may want to go big or go home. But, when you are trading in the Forex market, it’s essential to start small and work toward bigger trades. Keep in mind that you are getting started in the game.
Once you start getting a hang of the market, you can start betting more on your currency pairs and going all in.
Don’t Let Your Emotions Take Over
Many people say investors must have nerves of steel, and they aren’t far from the truth.
Sometimes you may believe your trade will skyrocket the value of your portfolio. But you start losing money from the get-go.
You may be a glass half full kind of trader and don’t want to cut your losses short. In this case, the best approach is to rip off the band-aid and close your position.
Emotions don’t win games in trading. You should always look at your trades with an analytical mindset and cut your losses short.
Focus on One Currency Pair at First Before Moving On
As a newbie, you should focus on trading one currency pair at first. After you earn experience trading Forex, you can move on to trading more than one pair at a time. But, keep in mind that you should always aim to play to your strengths.
Analyze and Compare the Market Performance Every Week
If you want to join the league of successful forex traders, you must assess the performance of the Forex market on a weekly basis. Are there any patterns?
Does it look like there’s going to be a market reversal? Spotting these patterns can help you develop your trading strategy for next week.
Calculate Your Investment Expectancy and Regroup
Since the Forex market moves continuously, you should always keep in mind your investment expectancy. This formula will give you an idea of the reliability of your strategy.
Your investment expectancy equals 1 plus your average winning trade over average losing trade. You will multiply this result by your percentage win ratio minus 1. If you haven’t placed trades, you should take a look at where your system says you should enter or exit a trade.
Will Using Our Tips Help You Become a Great Trader?
Yes, our must-know tips on how to trade Forex will turn you into a great currency trader. Before trading Forex, you should learn as much as you can about the market.
It’s important to develop a strategy that fits your investment goals. Focus on having an all-around plan from choosing the right broker to using the best exit strategy in your trades.
Want to learn more about becoming an elite trader? Check out our investing section for more interesting articles.