Forex Trading is the largest financial market in the world in terms of activity. It is a giant market with $ 5 trillion traded each day. With the number of traded volume comes great opportunity.
Traditionally only the rich have access to high-volume trading on the exchange but now, thanks to leveraged trading, virtually anyone can compete and trade in the Forex market.
There are many online brokers who facilitate trade with leverage, giving accessibility to traders with less capital who want to trade higher volumes.
It is important to consider a few key basics before entering the market with a ‘buy’ or position ‘sell’.
Though Forex trading is vastly popular all across the world that’s why many people are joining the FX market every single day. As a result at the beginning, they face various confusion regarding what they should do or shouldn’t do. For them, this guide will be an asset.
Here are the deets…
Do’s
Having a trading plan!
It is massively important to have a game plan and therefore why it makes it to the top of the list for this section. Not only is this true in sport, but this is especially true in the Forex. Traders need to be some sort of clear purpose and objective when entering the market. Forex trading is regarded as an aggressive market so having a plan is essential to success.
Without a plan, trading may also be considered gambling.
Do your own research
Knowledge is power so make sure you do some reading on the current market trends and political situation that may affect the currency in certain countries.
Politics is a good place to start when looking at how the currency can fluctuate as well as other factors such as war and natural disasters. In August 2005, Hurricane Katrina devastated New Orleans cost the US economy about $ 45.15 billion.
Epidemics can have a damaging effect not only on the populous but also on the market. Ongoing Coronavirus has been hammered in the market today and the last few weeks.
Global stock markets have been gripped by fear and English Stock markets saw their biggest fall since the financial collapse of the year 2008.
Besides Footsie’s worst day in 12 years, the DOW has 2,000 points removed as many economists are concerned over the looming global recession.
Also, try to generate your market predictions by yourself. Because it is very hard to get a trustworthy and profitable signal provider these days.
Have Patience!
Patience is a virtue and a very important element when viewed in the direction of trading successfully. Being patient helps to keep each pattern of impulsive behavior at bay.
Set A Goal
Set yourself a target of how much you are willing to lose. Not only that set itself the target profit you will be happy with.
Trading Platforms such as MT4 has a tool where you can set the ‘take profit’ to be desired and the ‘stop-loss’ where you will be stopped out of a trade when the profit or loss amount is triggered. This is very useful in the long-term position and if you can not log in to your trading account.
So now we have seen the Do’s. Now let’s explore the Don’ts-
Don’ts
Do not overcomplicate strategy
We know that having a strategy is essential for trading success. Having a clear purpose helps maintain discipline but try and keep things simple. Having too much to think about may serve to cloud judgment.
Do not let your emotions take over.
Humans are highly emotional and even more so when under stress. Stress can be magnified when money is involved!
What is important in the trade is to not let emotions affect the current ratings in the open position.
The big 2 emotions traders will experience at some point or other are:
- GREED
- AFRAID
Greed, one of the seven deadly sins and very dangerous attributes to have when trading. Greed makes humans behave differently and without clarity. It is the feeling of desire rather than necessity.
Greed may affect traders in several ways. Greed can make traders ‘overtrade’. Overtrading is the sense of chasing losses or having some open positions to try and compensate for the loss.
Traders can and will take unnecessary risks if greed begins to seep into the soul of trade. This is why having an important strategy and – stick strategy even more.
Traders must have certain advantages in mind in the pre-execution. Maintain discipline and take advantage of the challenge for most.
Fear can leave traders feeling like a deer in headlights and weaken us – produce against or scenarios.
When trade began to creep into profit, fear can make traders close positions too early in fear that prices will begin to fall when in fact the market is moving upward.
Similarly, fear can make traders close positions late when the profit target has passed and the market began to shift against us.
New traders are particularly vulnerable to FOMO – fear of money-losing. Traders open positions without thought or analysis, fear that an opportunity might go when in reality, it does not exist in the first place.
Also,
- Do not fall into the trap of revenge trading
- Once you have reached your profit target, take it. Utilizing the ‘take profit’ feature to reduce temptation.
- Do not use the money you can not afford to lose!
- It goes without saying, only invest capital that you can afford to lose!
- Trade should be taken seriously. With the right mix of analysis and research, Forex trading can be a lucrative side income earner.
- Do not turn a trade into gambling and staying within budget parameters.
Good luck! May you have a successful trading career.