FOREX/ CURRENCY TRADING TIPS
This article is aimed at those beginning as traders but will almost certainly be rules that have been followed by some of the most succesful traders .
1. Understand the markets and the principals of trading before you start.
These days it is easy to get trial currency trading platforms from any number of providers. This will not only provide you with an opportunity to test a particular forex platform but also see how you perform in a trading environment. I would recommend that you trade along the lines that you intend to rather than use it as a risk free gamble on the markets. Also there is a mass of products aimed at education and instruction for dealing many of them free.
2. Develop a clear strategy
It is important to understand all the forces that drive the forex markets. Whether you are more persuaded by fundamental or technical influences, for instance. Are you more short term than long term? What are your objectives and are they realistic?
3. Discipline
It is essential that you are disciplined in your trading. Don’t let a short term view become a long term head ache. Set realistic profit and loss targets. Learning to set realistic stop loss levels is essential. Also don’t allow profits to slip away.
Try and get some consistency in trading building profits slowly and surely as confidence grows. Don’t blow a few months hard earned trading profits in one obstinate bad position. DON’T Be afraid to change your mind.
4. Hard work
Read and research as much as you can. Find out which commentators seem to have a good handle on the markets. And do it consistently. If in doubt stay out as they say.
5 .Gearing
Much has changed in the currency markets in terms of gearing offered to forex traders. Frankly gearing of 500, 200 or 100 are just not suitable for beginners (or experienced traders for that matter). You might get lucky but statistics would say that you will be out of the game before you know it. So start with a small gearing and see how your performance goes. Realistically you should try and limit individual losses to less than 5 per cent of your collateral.
6 .You cannot win every time
Not even the best traders can avoid losses some times. In fact those currency traders are the best because they know when to take losses that is the tricky bit. Not when to take a profit. Try to learn from your experiences and analyze why your decision is wrong. Be prepared to expect the unexpected and remember to keep disciplined.
7.Stick to the major liquid markets to start.
Trade what you know and limit it initially to a few currency pairs. There is an enormous range of options in currency trading. However, if you try and become embroiled in too many you will not be able to do enough research and get enough information.
8. That Free Lunch
Very occasionally the forex markets seem to offer that big opportunity that seems easy to go with. It happens less now with the Euro than with the pegged currencies before. However, it does from time to time appear that sentiment, fundamentals and technical signals are all pointing in the same direction for a currency move. In these instances make sure you stick to proven strategies. Perhaps commit yourself to a bigger position in stages and make sure you do not get squeezed out of your position in some short term correction. As a rule of thumb it is estimated that for about 80 per cent of the time markets are not trending so the idea is to try and catch the 20 per cent when they are.
9. Limit your expectations.
It is easy to get caught up in the idea that you can expect returns of 100 per cent or goodness knows what. To start with, you should aim very low. Indeed after a first year′s trading, if you break even you have probably put yourself in the top 10 per cent of currency traders. Yes: 90 per cent of traders lose money.
10. Hope you were born lucky.
Not quite, but in my experience the good traders always say they are lucky the bad ones say they are unlucky. The good trader more often cuts his bad positions when he should while the bad trader will bemoan his luck at being stopped out at just the wrong level. With discipline and hard work you can make your own luck.
