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Identify your risk tolerance.

To gain profit in trading, you must familiarize yourself with the markets. To recognize the markets, you must first identify your risk tolerance. You have to be aware that your risk tolerance and allocation of capital to forex and trading are not excessive or lacking.

Goal setting.

You must carefully study and analyze your own financial goals before engaging in forex trading. Know what you want from trading and define a timeframe and a plan for your trading career. These are just some guide questions you for you when setting your goals in forex trading:  “Do I have the time to do it?”, Do I want to have financial independence?” or “Do I want extra income?”.

Choosing a broker.

It is imperative to make the right choice in selecting a broker. You may use the checklist below in choosing a broker.

• Do my expertise level and trading goals match the details of the offer made by the broker?
• What does the forex broker aim for my client profile?
• Does the trading platform meet my expectations?
• How efficient is my broker in terms of customer service?

Select your account type and leverage ratio according to your needs and expectations.

It is important that we choose the account package that is tailored-fit to our expectations and knowledge level. The different types of accounts offered by brokers can be quite confusing at first, but generally, the rule is that lower leverage is better. Having a standard account is advisable if you have a good understanding of leverage and trading. If you’re a beginner, you must go through a period of study and practice by the use of a mini account. Keep in mind that the lower your risk, the higher your chances, so make your choices in the most conservative way possible, especially at the beginning of your trading career.

Start with small amount and increase  your account through organic gains not by bigger deposits.

One of the best ways for trading forex is to start with small amounts and low leverage to generate profits. It is not guaranteed though that a bigger account will yield greater profits. You may opt to increase the size of your account from your trading choices but if you can’t do so, there’s no point in investing money to an account that is burning cash rapidly.

Begin with a single currency pair.

The world of currency trading is a myriad of intricacies due to the unpredictable movements of the markets and the distinct characters and purposes of market participants. It’s quite difficult to master all kinds of financial activities that take place in this world so it would be beneficial to a trader to restrict trading activity to a currency pair which you understand and with which you are familiar with. You may opt to start with the currency of your own nation.

Do with what you know.

If you are not sure about what you’re doing, then do not trade right away. Take time to understand both the positive consequences and the negative results that may result from opening a position.

Do not gamble by adding to a losing position.

Common sense will tell you not to be ignorant of the principles in trading. No one can exactly predict where a currency pair will be heading and even educated guesses cannot tell where the price will be. Do not gamble by adding to a losing position because the only definite value about trading is now. A losing position can be allowed to survive on its own but adding to it is never an advisable practice.

Control your emotions.

Human emotions can play great part in directing your career in trading. But extreme emotions such as too much excitement and greed should be controlled by the trader before making calculated decisions. Although emotions are inevitable since traders are human beings, mastering the art of controlling your emotions when trading can save you heaps of money. Applying a logical approach rather than an emotional-driven one is the best forex trading tip  to a become successful career.

Learn from your success and failure.

Keep track of your trading activity and identify your mistakes in calculations and trading strategies. You must be able to assess what works out and what does not.

Take advantage of automated trading but do it with caution.

We already emphasized the importance of controlling one’s emotions to have a successful and profitable trading career. Atomization of your trading choices and trader methods has become popular. Thanks to the development of forex robots, trading can simply be done even while you are away. Although automated trading can make many wonders for you, you also have to be cautious in being too dependent with forex robots as some are developed to rip you off in the end.

Simplicity is the key.

Experienced traders will agree that trading in every sense of the word is not rocket science. To lead you to a respectable career in trading, you must avoid the temptation to over explain, overanalyze and rationalize your failures. Set trade plans that is simple and is easily understood for you.

Don’t go against the flow.

Never go against the markets unless if you have the resilience to stick to a long term plan. It is never advisable to trade against trends or bet against the main forces of market momentum. Do not jeopardize your trading career and go with the trends so that you can have a peace of mind.

Forex and probabilities.

Forex is synonymous to probability. No definite method or strategy can guarantee profits all the time. Managing risk allocations by understanding the probability and risk management is a sure and safe way to trading.

Be a patient trader.

Only risk what you can afford to lose. Take your time to understand the markets, the fundamentals and technical factors in trading. Be persistent and have patience with forex trading because it is very unlikely that you will become a trading wizard overnight.

The foreign exchange market has loose barriers to entry which makes it one of the world’s most accessible day trading markets but this is also one of the reasons why a lot of traders make mistakes. Some novice traders fail to accept the fact that they are human beings and this makes them prone to making mistakes just as the greatest investors do. Here are common mistakes that one must avoid:

Sticking to one trading plan.

Expert traders get always start with a well-defined plan while newbie traders may be unlikely to have a trading plan in place before they even commence trading.

Underestimating your abilities.

If you think you can never succeed in the trading market, then don’t even bother to trade at all. Having doubts and low self-confidence about your ability to trade will lead to poor critical thinking in buying and selling from the market.

Trading Multiple Markets

Beginner traders may also jump from market to market. However, trading multiple markets can be a great distraction and may stave off the new trader from gaining the experience necessary to become a specialist and excel in one market.

Not using Stop-Loss Orders

You should have a stop-loss order for each trade that you have. Stop-loss order is an offsetting order that lets you out of a trade if the price moves against you by a specified amount.

Averaging Down or Up in Redeeming a Losing Position

Averaging down is adding to your position as the price moves against you and this is definitely a bad practice.

Risking more than you can afford to loose

It is recommended that you should only risk 1% or less of your capital on any single trade Having a coherent approach to forex trading will let you establish how much of your capital you can afford to lose.

Previsioning the news

Many currency pairs rise or fall rapidly at the onset of economic news releases. Instead of foreknowing the movement news will take the market, prepare for a strategy you can use after the news.

Becoming a smart trader in the forex market entails a lot of experience and know-how to learn how to minimize losses and maximize your income. Here are five basic steps that will kick-start your way to forex trading:

Educate yourself with Forex trading

Learning the theories before applying it is a fail-safe solution to starting your trading career. Forex trading only needs less understanding of the forex market but it does take time to familiarize yourself with it. Forex trading is not  tantamount to gambling. It has own rules and as a trader, getting all the knowledge from different resources will equip you in making the right decisions.

Select a broker

A broker is simply the middleman between the trader and the market. A broker provides currency traders access to a trading platform that gives them the option to buy and sell foreign currencies. When choosing a broker, consider these things:

Reputation

A forex broker’s reputation also tells its stability as an intermediary between the trader and the market. You can look them up online or research about i before selecting one.

License

Check for certifications and make sure they are valid.

Trading terms

Check for the kind of trading accounts being offered. Is it spread, leverage, initial deposit or commission?

Software

What kind of trading system or platform a broker can use? See if they have versions for mobile and brow

Support

A broker’s response is one way to tell if it is the right one or not. Try contacting the broker’s support team and assess if they respond appropriately and provide great customer service.

Security and reliability

If the URL has HTTPS protocol, then it’s a good one. In case you are using Chrome or Mozilla, you will see a green padlock to the address bar which means you have a secure connection. It is required both for password entry and payment pages.

Practice trading using a demo account

To apply theories you have learned about forex trading, practicing trading using a demo account helps. There are many trading platforms available online that allows you to trade using virtual money.

Open your own trading account

After trying on the simulation with a demo account, you are now ready to start your trading account found on the broker’s website.

Install a trading platform

The last step before starting your trading activity is to install a trading platform. You can choose any software like MetaTrader 4 and ZuluTrade.

Forex trading is quite interesting once you get the hang of it. But before even considering to open a trading account, first let’s go over some technical jargons or terms that you might run into when trading with forex.

1.PIP –you will often hear traders say this or see such term on any forex trading site. It means “Percentage In Point” or also referred to as Point. It is the most fundamental unit of measure used when trading currencies.

PIP is the minimum price change of a Forex trading rate. The most common Pip is 0.0001.

2. Ask price – in the context of forex trading, ask price is the price you can buy a currency pair at. It is the price at which the trading market is willing to sell the currency to you. It’s basically the minimum price that you are willing to receive as a seller.

3. Bid price – The bid price is the price that you can sell a currency pair at. It’s the maximum price that a buyer is willing to pay.

4. Spreads – Spreads are the difference between bid price and ask price and is parallel to trading cost. If the spread is tight, the trading cost is low. If the spread is wide, the trading cost is high. 

5. Currency rate – This is the price/rate of a nation’s currency.

6. Market order – When you place an order either you are buying or selling, there are two fundamental execution options namely:  place the order at market or at limit. Market orders – these transactions are to be execute fast with the current market price.

7. A limit order – sets either the maximum or minimum price in which you’re willing to buy or sell and lets you put a specification on the trade entry price.

8. Leverage – is the ability to control a large amount of money in the forex markets. It allows the trader to make meaningful profits on the normally miniscule daily currency movements while risking only minimal capital on a given position.

Leverage may exponentially increase your profits as well as your losses so it is very important that traders be careful when using leverage.

9. Margin – Margin is the amount of money required in your account in order to open a trade. It is calculated based on the current market quote of the base currency of the trader’s account versus the base currency of the trader’s account, the volume requested, and the leverage level of the trader’s account.

The formula for margin is: (Current Market Quote * Volume) / Leverage = $Margin Required10. Expert Advisor (EA) – is basically an electronic system that you install onto the platform that automatically follows a trader’s instructions after meeting a certain criteria. In a simpler sense, it will do the trading without the trader touching the computer or mobile phone.

If you are just a beginner and still a little bit overwhelmed in the forex market, this post is for you. I have scoured the internet to find the most helpful sites to guide newbies with their trading career.

Abnormal Returns

Abnormal Returns is a “forecast-free investment blog” which has been up and running for a couple of years and provides a clear picture about what financial trading is.

Investing

Investing.com is a famous global financial portal owned by Fusion Media Limited and provides real time quotes for free

Daily FX

DailyFX is one of the world’s leading site for forex trading that provides comprehensive review, news on global financial markets and analysis. It offers every tool you need to trade in the foreign exchange market.

Forex Magnates

Finance Magnates was known as Forex Magnates which had its initial focus on the Forex B2B sphere. It is the world’s only multi-asset online trading knowledge hub. Finance Magnates literally caters to the trading needs of the entire global trading industry.

FX Street

FX Street is a leading source for real time forex analysis where you can get the information you need to make the best decisions in the currency markets.

Baby Pips

Baby Pips is the most common go-to site and one of the top viewed traders educational site and community. It has established itself as the premier destination on the web for learning how to trade the Forex market.

Investopedia

Investopedia is also a leading source of financial content and provides easy to understand articles and the basics about forex trading.

Forex Factory

Forex Factory provides high-quality information that traders can apply in starting their trading career

Earn Forex

Earn Forex is a helpful website that provides visitors with tools and information to become successful Forex traders. They explain the basics of Forex trading, giving you free e-books and articles that help to learn more about trading and offer online calculators, downloadable indicators, and free expert advisors.

Trading Economics

Trading Economics is also an excellent website because it provides readers with precise information covering 232 countries from around the world.