10 Forex Trading Tips For Beginners.
The careers of many Forex traders have gotten off to a rough start without the right tips and forex strategy. You may barely know what a pip is in Forex or you may have been learning Forex trading for many years. There are also tips and tricks that even experienced traders can pick up along the way. Here are the top 10 Forex trading tips for beginners.
Choose a Trading Style that is Compatible with Your Personality and Goals
There are four different trading styles: scalping, day trading, swing trading and position trading. Scalping is for those who don’t have a lot of patience. They want to get in, get out, and get on with it.
Scalpers seek to make small profits, perhaps as small as a pip in Forex currency trading per trade, but on a lot of trades.
Day traders are similar to scalpers but can analyze a little more and are patient enough to at least hold a position for part of a day.
If you like to exercise patience and wait for the right trade to develop, scalping is not for you—you are more of a swing trader.
If you like analyzing the market long-term and benefiting from fundamentals that take weeks or months to develop, position trading is more your game.
Your personal preference for fundamental or technical analysis, the type of Forex strategy you like, and the time you’re available to trade are also factors that can also play a role.
Keep Records of All Your Trades
Making mistakes is how we as traders learn and improve our skills.
But without a record of the trades you’ve made, the risk to reward ratio, and the reasons you decided to make the trade—how would you be able to remember it all?
The answer is to write all of this down. As burdensome as it may seem, it can pay off handsomely when you take the time to go back over your previous trades and analyze what went wrong and what went right.
You can use this information to tune your trading style and strategy to meet your performance goals.
You will easily be able to see your Forex profit and loss and how to improve your decisions, pip by Forex pip.
Maintain Control of Your Emotions
Trading can bring out strong emotions in people—and no wonder. When you’re trying to make a living for yourself and when each trade could wipe out your entire trading account, it can be very stressful.
One key to maintaining control of such strong emotions, is not to risk so much of your capital in one trade.
Look at Forex trading as a long-term probability game, instead of a lottery or all-or-nothing proposition.
It may take some traders a few busted accounts to realize this, but the most successful Forex traders are those who manage their risk and keep their anxiety to a minimum.
This helps them keep their nerve and well-positioned to coolly make the next move to bring them Forex profit.
Always Set a Stop-Loss
When you study Forex strategy and learn as much as you can, you develop a level of confidence that your trades will be successful.
But this healthy expectation of Forex profit should be tempered with a firm knowledge that you will not always be right.
For this reason, it is imperative that you always set a stop-loss on all your trades, as soon as you open them.
This protects you from catastrophic loss to your account in case the market turns against you, even when you are not monitoring your position.
Don’t Be a Pig
There is a saying that “pigs get slaughtered,” and that’s very true in any type of trading, including Forex.
What this saying means is “don’t get greedy.”
Set a profit target for every trade and either exit the trade or set stops or trailing stops in such a way to let your trade run while limiting risk.
Another strategy is to set your stop to the break-even point as soon as you feasibly can. This allows your trade to run without fear of loss, limiting risk.
More Forex Trading Tricks You Didn't Know About
Know When to Walk Away, Know When to Run
Sometimes you just know when you’re off your game. A basketball player knows this when he or she misses their shots. A Forex trader knows it when he or she loses on trades.
Forex trading is a complicated craft that requires not only solid Forex strategy, but also mental discipline and focus.
Humans are simply wired in such a way that high performance day in and day out sometimes simply isn’t possible. Learn yourself and learn to recognize when you should sit a day out.
Set a strict daily loss limit and when you hit it, walk away. There will always be the next trading day.
Use Technical Analysis to Time Your Entry and Exit Points
Even if fundamental analysis drives your trades, using technical analysis to find the optimum entry and exit points can really make a difference.
By finding those dips and pullbacks to buy on, you can gain an edge that can keep your stops from being hit and you can make trades and utilize a Forex strategy that your risk-reward criteria would not otherwise allow.
Set a Limit on Your Risk When You Open the Trade
Many Forex experts who emphasize risk management recommend risking no more than 2-5% of your total capital on any one trade—some even recommend less.
Learn how to calculate the price level at which you would lose 2% of your account.
Use this risk level to determine whether the expected reward is worth the risk. You can reduce the order size to make your trade fit if you must.
If you have a 30 pip Forex risk, ideally you would at least want a 60 pip Forex reward if the trade is successful.
With trades like this that have a 2-to-1 pip Forex reward to risk ratio, you would only need to be right 33% of the time to break even.
Keeping your trades to a high reward to risk ratio like this is an effective long-term Forex strategy and maximizes your Forex profit.
Start with One Currency Pair
When you first start out toward your goal of Forex profit, don’t attempt to learn everything there is to know about every currency pair available.
Start with one and stick to it.
This will allow you to focus on all the aspects of the two currencies that make up that currency pair, without being distracted by the distinctive elements of any others.
Always Be Aware of News Events
Whether your Forex strategy calls upon you to trade the news or completely get out of the way of the news, it is vitally important to be totally aware of any news events that are about to occur that might affect a currency you are trading.
News events can move markets in a big way very quickly. The rapid pace at which the markets move and the intense buying or selling pressure can lead to low liquidity and high spreads.
Massive movements of pip in Forex currency markets can be experienced during these times. These high spreads could eat into your Forex profit.
Keep tabs on your economic calendar and stay aware of all the anticipated news events that could affect your positions and try to keep an eye on developments that are not expected as well.
Forex Trading Tips Summarized
- Choose a Trading Style that is Compatible with Your Personality and Goals
- Keep Records of All Your Trades
- Maintain Control of Your Emotions
- Always Set a Stop-Loss
- Don’t Be a Pig
Know When to Walk Away, Know When to Run
- Use Technical Analysis to Time Your Entry and Exit Points
- Set a Limit on Your Risk When You Open the Trade
- Start with One Currency Pair
- Always Be Aware of News Events
These 10 Forex trading tips for beginners will give you a solid foundation on which to build a winning Forex strategy and your goals to profit.
Forex holds a lot of potential, but without the right game plan, you can easily find yourself out of the game. Establishing the right mindset, risk management, trade management and educational goals can make all the difference in your Forex profit. One great resource for beginner is Forex Factory I encourage you to check them out.