Here are a few tips for beginners.
1.) Understand that forex is about chances
Forex trading is about risk assessment and probability. No single method can make you money all the time. The secret is to position yourself in a manner that the losses are harmless and profits are multiplied.
2.) Ascertain your risk tolerance
The only way to position yourself as described above is by carefully studying and analysing your financial goals. Ensure that you have the capacity to tolerate market volatility. Your risk tolerance and capital allocation to forex should not be too excessive or lacking.
3.) Plan your goals and stick to your plan
Decide what you want and define a time frame and a plan to get you where you want to be. Do you want to quit employment or do you merely want to make some extra cash? How much time can you devote to forex trading? Answers to these and similar questions can help you gain a better approach to currency trading.
4.) Choose your broker carefully
Many beginners often underestimate the value of a good broker. However, failing to choose a reliable broker can easily see you losing all the gains made through your hard work and market analysis. Take a look at the broker’s trading software. Does it meet your expectations? Is the customer service efficient? What kind of clients does the broker seek to serve? Answers to these questions can help you choose a reliable broker.
5.) Start with little capital
As a beginner you are better of starting with small sums of money and increasing the size of your capital through your trading gains. You can add up your deposits as your account continues to generate profits.
6.) Single currency
It is advisable to trade a single currency due to the chaotic nature of the financial markets. If possible, trade with the currency of your country because you have a better understanding of the financial activity that goes on in your area. However, if that is not your preferred choice you are better of sticking with the widely traded pairs.
7.) Never add to a losing position
Forex trading takes a lot of intelligent guesses. Nobody knows where a currency pair will be heading a short while later. It is therefore not wise to add to a losing position – unless you want to gamble. You should allow a losing position to survive on its own in accordance with your initial plan.
8.) Market trends
Never go against the markets, unless you have the necessary financial resilience and patience to hold on to your long-term plan. You should also avoid picking tops and bottoms against the market trends.
9.) Be patient and don’t give up
Success in this game calls for enough patience. You should resist the temptation to give up after the first loss. And as long as you risk only what you can afford to lose, the pain of losses should not derail your plans.