One of the trades that are undoubtedly attractive has got to be forex. Forex trading is the largest
market today that runs 24/7 under a decentralized system. Meaning, this also makes the market
pretty liquid compared to other markets.
So it won’t be a surprise if traders switch or start out with forex. And being the most relevant
trade around, this keeps the market running. And with operations ongoing non-stop, this opens
the doors to tons of risk making it a highly volatile trade.
So with every trade, comes its fair share of advantages and disadvantages. And for forex, you
can expect a problem with their high volatility, an unregulated market, fewer residual returns and
more.
If you’re a starting trader, then you have to prepare yourself before stepping into forex trading.
To help you out, below are tips you should consider before becoming a forex trader!
Tip no. 1 – Know the market like the back of your hand
Before entering any market, you need to do your homework! Forex trading is already super
complex, and entering it without factual knowledge can increase your odds of failure.
This is something A LOT of starting traders do today, skip the in-depth learning process which
can greatly affect your income and even lead to losing more than you invested. So before you
start trading consider learning about forex trading as a whole.
What are the things to learn before forex trading?
Listed are things you SHOULD learn before trading. Each item is incredibly significant in forex so
consider studying them!
● The kinds of currency pairs.
● The importance of bid-ask spreads.
● The types of trading strategies.
● The leverage involved when trading with forex.
● Forex trading terminologies.
● How trading platforms work.
● Risk management.
● Trader psychology.
● How to read charts and graphs.
● How to use analytical and fundamental trading tools.
Tip no. 2 – Pick a trading strategy that suits your trading style
Once you know a good sum about forex trading, you can now choose a strategy. There are 5
major kinds of forex trading techniques and these are (1) Day trading, (2) Swing trading, (3)
Scalping, (4) Posting trading, and (5) Trend trading.
Each of these trading strategies comes with its own process and objective. So depending on
your trading style, there is definitely a strategy for you. To know what trading strategy will suit
you best, here’s a rundown of each one:
Day trading – If you prefer short-termed trades consider day trading. This allows you to open
and close several trades a day. Each business is on hold for only three to five hours before closing.
As a day trader, your goal is to profit from small market movements throughout the day.
Swing trading – This strategy can stay on hold for more than a day and can even reach up to
weeks to a month. Your goal as a swing trader is to profit from small to medium gains in
short-term trends. For this trade, you need to use technical analysis to help you speculate.
Scalping – Another short-termed strategy is scalping. As a scalper your goal is to profit from
small price changes in the market by reselling them, making a fast profit. This technique
requires you to have a high degree of analytical capabilities.
Position trading – This is a long-term strategy that holds a trade for several days, weeks, and
even months. Your objective as a position trader is ignoring small market movements and
keeping an eye on grand fluctuations in the market.
Trend trading – This strategy follows market trends and speculates using
technical indicators, including past & present market movements.
Tip no. 3 – Practice!
Last but not least is practice! Once you know the market and the strategies you can now go
ahead and try to master them. This is a great way to prepare yourself before actually trading. A
tip you can do for this step is to practice on demo accounts.
Demo accounts can be found when you subscribe to a trading platform. These accounts will
help you learn how actual trades work. Plus these also come with tools, charts, and many more
things to help you practice your trading without risking your money.
What are the trading platforms with the best demo accounts?
To help you out, down below is a list of the best demo accounts for forex trading:
● eToro
● FOREX.com
● IG Markets
● AvaTrade
● Capital.com
Take away
Now you know the 3 essential tips every novice trader should know, use them to your
advantage, and apply them before trading! These tips are things most starting traders overlook
that simply lead them to failure. Traders who don’t make an effort to learn about forex in-depth
are the ones who add to the annual percentage of failing traders. So grab your books and
highlighters and learn more about forex!
For more reading blogs visit Deadline Daily.
