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.
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.