Although there are strong profits to be made from forex trading, large losses are also commonplace; especially for beginners. However, by following these tips closely, you can avoid any possible disasters and increase your chances of turning a profit in the markets. Here are our five top tips.
- Know yourself and your needs
To work well in the markets, you first have to define your risk tolerance. From here, you can work out your capital allocation to forex trading, and ensure that this is managed by the correct level of risk tolerance.
This means that, before you place your first trade, you must know:
- Your level of disposable income (the capital you have available to trade forex)
- Your trading/financial goal (and how long you’re willing to take to get there)
- Your level of risk tolerance
Once you know exactly what you need and your preferences are, you’re ready to begin the process.
- Choose Your Broker Carefully
It is impossible to over-emphasise how important your broker is to your trading efforts. Not only do you want to choose a broker that’s reliable and has quick execution speeds, but it’s equally important that you choose a broker that matches you level of expertise If you’re unsure whether a broker is right for you, try a demo account like the one offered by FXPro first. This way, you’ll know whether it’s right for you.
Else, research your broker carefully and assess:
- What client profile it has
- What trading software do they use?
- What’s their customer service like?
- Do they offer education?
- Start Small
Start small and don’t rush into trades. If you lack the money to start, consider financial help and even out the risks you can take. You can seek instant funding from a prop firm if you do not have enough to make a trade. But remember, you don’t want to try running before you can walk, so try to aim to slowly accumulate your profits rather than ‘hit the jackpot’ with every trade.
In your first year of trading, you’ll still be educating yourself. So, conduct proper technical analyses for different stocks, make accurate calculations, place small trades, and keep track of the strategies you implement. If it helps, you should log them in a trading journal and focus on creating a trading strategy that works for you rather than trying to make huge profits every time.
- Choose an Account Type and Leverage Ratio to Suit Your Needs
You also need a package that suits your expectations and your knowledge level. As a beginner trader, you should opt for low levels of leverage.
If you’re a complete novice, consider a mini account while you learn to trade and navigate the markets. If you have a reasonable understanding of how markets operate and how to utilise leverage, then opt for a standard account.
Generally speaking, the lower the risk, the higher your chances of success. So, don’t try to run before you can work and opt for an account that suits you, not one that makes it look like you have the highest margins through leverage.