Top Forex Trading Tips For Beginners - Guide 2021
Willing to start trading forex and don`t know what to do? Went through all the possible sources of information and still don't feel like you are ready? No worries, we got you covered here! In this article, we will go through some tips of forex trading that will help you to get started. These will include some psychological moments and practical aspects aimed to make you feel more confident.
Choose the Right Broker
While this point is often neglected by beginners, the importance of choosing a broker cannot be overestimated. The fact that a fraudulent or simply unreliable broker can wipe out all the profits made through hard work is obvious. But it is equally important that your level of expertise and trading goals match the terms of the offer made by the broker. What kind of customer profile is the forex broker seeking? Does the trading software meet your expectations? How effective is the customer service? All these questions should be answered before you start considering all the nuances and complexities of forex trading.
Create a Strategy
To make a profit in trading, you must understand the behavior of the market. To understand the forex market, you must first understand yourself. The first step of gaining knowledge about yourself ensures that your risk appetite for placing capital and trading in the forex market is not insufficient or excessive. It means that you should thoroughly examine and analyze your own financial goals before trading in the forex market.
Once you have clearly defined what you want to get out of trading, you must systematically determine the periods and the working plan concerning the implementation of your trading strategy. What is a failure, what would be a certain success? What is the time for the trial and error learning process that will inevitably be an important part of your training? How much time can you devote to trading? Are you striving for financial independence, or are you just looking for extra income? These and similar questions need to be answered before you can get the clear vision to develop a consistent and systematic approach to trading. Also, having clear goals will make it easier or completely eliminate the need if risk/reward analysis shows you can't make a profit.
You should start Forex trading with a stage of training in making virtual trades. It is important to practice strategies not with real money, then you can see your most common mistakes and eliminate them. Opening a demo account can be a solution to this problem. In such a way beginners get an opportunity to get acquainted with all the functions of the trading terminal, without risking their money. Once you are done getting acquainted with the terminal, learned how to place different types of orders, and chosen a suitable strategy, you can switch to a real account.
It is super reasonable for a beginner to start with small amounts and low leverage, ensuring that the account balance grows by taking a profit. There is no economic justification that a larger trading account will allow you to make larger profits. If you can increase the size of your forex trading account through your trading results, that's just fine. Otherwise, there is no point in continuing to transfer money to an account that burns cash like a furnace burns paper.
So, starting gradually is the best thing you can do since it enables you to think thoroughly of any action you are about to make. Moving slowly, step by step, you minimize the risks of bad decisions.
Keep Your Emotions Under Control
Greed, excitement, euphoria, panic, or fear should not affect the trading strategy of forex traders. But still, traders are human beings, so obviously you have to find a way to live with these emotions, while at the same time managing them and minimizing their effect on trading. That's why traders are always advised to start with small amounts. By reducing risk, you can be calm enough to realize your long-term goals by reducing the impact of emotions on your trading actions. A logical approach and a less emotional trading style are one of the best forex trading tips you need for a successful career.
The perfect trader is a robot, following a strict set algorithm and strategy. A man can not be such, so he is prone to make mistakes. The analogy is carried out in many areas of life. For example, if you sit in a plane, which pilot will you trust?
- An unbalanced novice who loves his job and enjoys it. Surely he is not perfectly trained to fly, may not know all the rules.
- An experienced pilot without emotions. He knows exactly what to do and how to do it, always follows the instructions.
Hundred percent, everyone would choose to fly with the second pilot. Emotions are better experienced in other daily activities, not in a responsible job.
In one of the most popular trading books, Brett Steenbarger 's "A Trader's Guide to Self-Discipline", an analogy is repeatedly made between sports and trading. A professional athlete thoroughly practices every slightest movement so that the sequence of correct actions reaches automatism. It is the same in trading: on a trading account with initial capital, it is necessary to practice every element of trading, including the moment of opening a position, holding an open position, and closing. Besides, it is necessary to experiment with different order types and financial instruments.
The analytical approach to trading is not just about fundamental and technical analysis of price trends, or formulating trading strategies. It begins at the first step with the beginning of trading practice, with the first dollar invested in an open position, with the first mistakes in calculations and trading methods of forex. The successful trader will keep a diary, which is a journal of his trading activities, where he will carefully examine his mistakes and successes to determine which strategies work and which do not. It is one of the most important trading forex tips you will get from a good teacher.
Risk and probability analysis determine everything in the forex market. There is no single method or strategy that will consistently bring in profits. The key to success lies in a trading strategy where losses on individual trades remain at an acceptable level, while profits grow. It is only possible when risk allocation is managed following the understanding of probability theory and risk management.
Realistic goals are necessary to look at your situation soberly. For example, don't expect huge profits if you have a small trading account: a 30% return on a $5,000 account is not the same as a 30% return on a $1 million account.
The next tip is education. Indeed, it may seem simple and obvious, most traders often stop learning after they start trading on real accounts, which is a mistake. Progress does not stand still and every day appear new ideas, strategies andб remembering that the market doesn`t always act in terms of historical data, being up to date is crucial for anyone willing to succeed in trading.
Most often professionals set themselves a corridor of work. For example, +25% of deposit and -10% of the deposit. That is, if a person has increased his deposit by 25% - he has finished trading. If a person has lost 10% - he has finished trading. The beginners, in the heat of passion, can lose the whole deposit in an hour.
Trends Are Good for You
It is recommended to initially avoid any strategies aimed at working against the trend. Only professionals can use such tactics effectively. Corrections begin and end quickly, and most beginners who trade against the trend lose their money.
If the market is in a flat condition, you should also refrain from trading. In the case of a prolonged correction, act similarly. You should enter the market only when the trend is clearly seen. Trade when conditions for opening trades are optimal. If the market is uncertain, it makes no sense to place any orders since consequences cannot be predicted. It is better to wait until the difficult period is over than to get involved in some adventures, hoping for luck.
Choose the Best Trading Conditions
Along with the choice of the broker, trading conditions are fundamental for successful investors. With the proper spread, commissions, and trading terminal you will be able to get the most out of trading on the forex market.
Plan Every Trade
The vast majority of beginning traders start trading on the market without a plan. Regardless of whether you want to make regular profits or prefer a passive source of income, creating a trading plan is important. Otherwise, investing and speculating becomes a losing gamble.
Adhering to a trading plan allows you to place orders systematically and deliberately. Over time, your skills will improve, increasing your trading efficiency. You will learn to understand whether you made a mistake or the market just didn't behave as it does most of the time.
It is also a mistake for beginners to open an "accidental" trade. Any purchase or sale of currencies should be made after analyzing the situation according to a trading plan.
No doubt, trading too much did not help anyone. The point is placing too many orders you risk losing concentration, consequently, it equals gambling. The best thing you can do to avoid that is to follow your trading plan, which will include all the information about your trading behavior, as well as the maximum number of positions open.
Don't Be Greedy
The main enemy of a trader is a lack of discipline. Many newbies are unable to cope with their own sense of fear or greed. The most typical situation is holding unprofitable positions. Losing money is very unpleasant, so many traders procrastinate closing losing trades until the very last moment. And all this time losses accumulate, and as a result, they "kill" the lion's share of the deposit.
Stop-Loss is a tool to protect the trader's capital. Without it, you can lose all the money in your account in one trade. Every professional must know and understand the level of risk that accompanies his trade. For ease of understanding here is an example. If you have lost 25% of your deposit, then to recover it, you will need to earn +33%. And if you have lost 75% of your deposit, then to recover it you will need +400%. So clearly limit your losses. It is also relevant for fixing the profit.
Moreover, if there is a chance, it is better to move your stops to the break-even, because it makes no sense to turn a profitable trade into a losing one. It is especially important to set Stop-Loss if you are not monitoring the market at the moment. There is so much news coming out now, on or off schedule, that any unexpected "political scoop" with a bad set of circumstances and no stop with slippage will wipe out a good half of your deposit.
As we have mentioned above, the market is all about progress and development. What you need to do is not to follow your strategy blindly without taking time to analyze the situation. Trading, just like everything in our life, favors flexible people. We highly recommend you to experiment with the different ideas and strategies, so you will be ready for any situation and force major. It should be done on the demo account, so you do not risk your funds.
Forex Trading Tips - Conclusion
Professional traders eagerly share their experience, thus educating the new generation of traders. Tips of forex trading are based on the many years of experience of previous generations of market participants who learned from their own mistakes. In any case, while learning how to trade the beginners on financial markets will make their own mistakes which are inevitable. But after going through the long process of becoming a trader and finally turning into a professional you will be able to receive stable profits from trading on forex and over-the-counter markets. Strive for perfection, don't stop there, and listen to the advice of experienced traders.
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