10 Forex Trading Beginner Tips That Will Save You Money
It is very easy for a newbie forex trader to get overwhelmed and confused. There is a lot of information that the trader has to take in to start forex trading and continue with it as a successful profession. However, this is best done when taken in a slow manner.
Below are 10 tips that a beginner forex trader can keep in mind that will help to set up a successful career and also help to save money in the early stages.
#1. Learn the basics thoroughly
As a starter in the forex trading market, it is important to learn the basics thoroughly. Firstly, the trader should make it a point to learn the jargon that is commonly used during trading and their meanings. It is important to get a grip of technical and fundamental analysis for a beginner in forex trading and thereafter go about to put in place a winning forex trading strategy. This would help them to save a lot of money and trouble later on.
#2. Manage the money properly
The beginner forex trader first has to survive in the market and then stay on to succeed. It is common for novice traders to have more losing trades than winning trades. However, if the trader goes broke during this time, it is very difficult to come back. For this the trader should have a good trading strategy in place and more importantly, good money management.
Having utmost financial discipline during trading is a must for survival. Only this can get the trader further in the profession. Some money rules that can be followed are: invest only that amount of money that you can afford to lose; for every trade do not risk more than 3% of your trading capital; and, finally, as a beginner, maintain enough capital reserve for at least 40 trades.
#3. Set a stop loss for every trade
Presetting a stop loss for every trade is important as it helps to predetermine the trader’s loss in case the market moves in a direction that is unfavorable. It is also important to remember that it is not wise to move the stop loss further away once the trade has been opened.
#4. Be realistic
It is vital for the new trader to be realistic. Understand that only hard work in the beginning stages will pave a way for success. If someone tells you that forex trading is easy and you can make a lot of money without much exertion, they are perhaps lying. It is not easy: physically or mentally. Mental traps are common along the way: the trader is likely to be emotionally overwhelmed, sometimes get greedy and depressed at other times. It is important to be grounded and realistic.
#5. Do not trade too much
In the beginning stages, it is important to trade with a not-so-high frequency. If you trade a lot, then the chances of becoming emotional about the trades and their outcomes is possible. This can, in turn, affect the outcome of the subsequent trades. Trading discipline is therefore very relevant in a beginner traders’ professional life.
#6. Do not change the forex trading strategy
It is not recommended that beginners in forex trading change their strategy too often. Whatever, be the strategy, it is important to learn it well and then stick to it. Jumping from one strategy to another only gives the trader false hope and the trader does not ever learn one strategy completely to master it. Beginner traders tend to switch to other methods when they have a few losing trades when using one strategy. It should be understood that this is normal in forex trading whatever be the strategy. Only sheer hard work and discipline can help the trader to master the strategy.
#7. Do not place the stop losses too close
It is important not to place the stop loss at too close a price to the entry price. This would wipe out the trader’s chance to make a winning trade in case market decided to move in a favorable direction. Though the idea is not wrong, beginner traders should overcome the drive to place the stop loss too close in a bid to save them from any loss at all.
#8. Do not start without any education
It is most important that a forex trader gets trained and educated before trying out moves in the currency market. If the trainer is not educated, it is easy to lose money in forex trading. Some forex brokers offer demo accounts that the beginner trader can practice on before attempting to trade in the real currency markets. Some money has to set apart by the newbie trader for education. It is important to learn from the experts. It is easier to duplicate their strategies in case of favorable/unfavorable markets.
#9. Do not get negative when trades are unfavorable
It is normal for the market to turn unfavorable and result in losing trades for the newbie forex trader. In such a case, it is important to allow the trades to take their own course and not close them too early. The stop loss should be put in a position where it is OK for the trader to let go of the trade. It is not a good idea to micro-manage the trade.
#10. Interact with other traders
In addition to reading books on forex trading, it is important for beginner traders to use other traders’ experience as a learning source. Fellow traders would be able to provide valuable advice about how good the trading strategy is on the basis of their practical experiences. Becoming a member of online forex trading forums is a good idea. The beginner trader can clarify all doubts with smarter traders and sometimes even experts in the field.
For beginner traders, it is important that they get a good idea about the returns that they need from the forex trading system to set up a good trading strategy and follow it up with hard work and discipline. This will help them to save a lot of money rather than follow seemingly easy methods and lose money as soon as they begin their forex trading career.
With over seven years’ experience in the heart of the investment industry, Daffa Zaky has become a respected commentator in the financial world. Daffa remains a keen forex and binary options trader. He is a regular featured analyst for a number of online news portals and was responsible for FxDailyReport.comRead Full Bio