For people who want to find a great way to invest their money, hate the idea of tying up their assets with position trading and want something more dynamic, forex trading might be just the thing they were looking for. Still, starting out in forex trading is not an easy thing to do. In order to help you out with this, here are five tips that you may find useful when looking to improve your forex trading skills.
1. Start with smaller investments
What some people call intuition, others see as nothing more than subconscious analysis of similar previous situations. However, learning a business skill from your own mistakes is an expensive didactic technique, yet, no one can dispute that it’s the most efficient one out there. That being said, in order to acquire experience with minimal losses, you need to begin with small sums and work your way up.
The best way to get there is to limit your investments and set your stop-loss at about 1 percent. If your stop-gain order is at 6 or even 7 percent, you will be able to remain profitable with as little as 30 percent of successful trades. All in all, the amount of money you invest will increase with time, while these stop orders usually remain the same, regardless of the investment size.
2. Look for a reliable broker
The next thing you need to understand is the fact that you don’t have a direct channel of communication to the forex market. In other words, your money goes through an FX broker, which means that features they have to offer may affect the overall success of your project. For the beginners, availability of free reliable learning material and experts’ advice is crucial. Later on, the difference in latency and the option of social trading may take a much larger role. Overall, this is something you can’t afford to underestimate.
3. Make sure you know what you’re doing
The problem with most traders is that they are exclusively profit-oriented. Sure, money is always the main motivator, yet, it shouldn’t be a determining factor in your decision-making process. One of the greatest problems with the recent boost in the popularity of cryptocurrency is the fact that more and more of investors don’t know the first thing about this trend. Needless to say, this is not unlike gambling. The same is applicable to the world of forex, as well.
When it comes to forex, you’re not just randomly trading between currencies. Early on, you need to set your mind towards currency pairs you are familiar with. The four major pairs are EUR/USD, USD/JPY, GBP/USD and USD/CHF. Additionally, it might be wise to focus on one or two pairs. Of course, there are many other (even more lucrative) options for you to explore out there, yet, doing this from day one is purely luck-based and therefore not a great business model in the long run.
4. Set out on your own
The lack of funds often makes people enter a partnership. In the past, business partnerships were known to end many friendships, however, this is much more likely to happen in the world of forex. Think about it, this is the industry that requires risky decisions to be made day in and out. Eventually, one party will make a mistake and, depending on the gravity of this error, the other party might not be able to take it. Moreover, this is an industry where one is compelled to act quickly and getting stuck in an internal argument when the time is of the essence is not a smart idea.
5. Look at it as a business
In the world of forex, there’s no place for notions like “gambler’s luck” or a “streak” of any kind. Just because you’ve lost the previous 10 trades, it doesn’t mean that the next one has to be the one to help you bounce back. Just because you’ve made a good choice in the previous 10 trades doesn’t mean that you are now unable of making a mistake or that you are already a master of forex, barely three months after you’ve entered the market. This issue needs to be calculated and approached rationally. After all, this is not a game.
In other words, regardless of your luck, you are bound to hit a rough patch near the very start. After all, forex trading is probably unlike anything you’ve ever done in the past. Because of this, you would be overconfident, even foolish, to assume that you can intuitively learn the game simply by trading. Nevertheless, with the above-listed five tips, you have a way to make this transition much smoother.