Forex trading is a complex discipline that’s subject to a range of risks and variables. Understandably, many new traders are uncertain where to gain the necessary insight to achieve success. The obvious starting point is the internet. However, there is so much information available, that it’s possible to be overwhelmed and decide it’s not for you. A simple internet search on forex can lead you to misleading market indicators and a plethora of “tried and tested” trading methods by self-acclaimed forex experts.
Worst of all is the misconception that forex is a market where easy money can be made. This couldn’t be further from the truth: it takes time, dedication and knowledge to become a successful trader. And it’s no different to any other venture in that there are concepts, patterns, techniques and risks that need to be understood. To help you get started, leading and award-winning forex brokers, Salma Markets, have assembled seven essential tips that beginners should understand before plunging head-first into the world of forex.
Understand the market dynamics
In the FX market, much of the liquidity comes from experienced institutional traders and big banks. Your aim is to not be a small fish chasing the sharks, but the small fish that swims happily alongside them. Additionally, it is unwise to do battle with the “big players”. Save yourself the stress especially as a beginner. And please remember, do not try to make money off these big forex traders, just focus on learning and growing at your own pace.
Learn to interpret FX charts and how the market operates
There is a popular misconception, especially among new traders, that there is some magical or secret strategy, or certain indicators that are adopted by successful major forex traders. On the contrary, most of the time, this is completely wrong. These major forex players only rely on proven and tested technical analysis methods – some of which are the identification of trading ranges and horizontal support/resistance. There is no such thing as a magical strategy in trading forex. New traders should concentrate on mastering the basics, such as reading forex charts and learning the rules that govern the foreign exchange market.
As a beginner, the focus should not be on how much money you can make from trading forex, but how well you can manage your profit moving forward. Most beginners are fast to take an expensive gamble by risking the majority of their account on a single position. This trading style is doomed to failure, and professional traders would never put all their eggs in one basket in this way. There will always be a period when you’ll face loss. It is important that you have a good money management plan in order to ride the storm.
Keep your eyes on the market
Most inexperienced forex traders often trust various forex tools and indicators rather than actually studying the FX market itself. Indicators and charting software are valuable tools to support your progress, however, on their own, they are unlikely to bring you long-term success. The goal to trading successfully is not to switch from one charting software or indicator to another but to carefully study market behaviour and understand the meaning of these indicators and signals. Constantly switching between tools is not a good idea: you should select those that compliment your trading system, learn how they work, and then invest time studying how they work with the market.
Plan your trade and trade your plan
Most beginners struggle to get their head around this motto. Salma Markets believe that every trader wants to make profit on every single trade they make. However, you should view each trade as a risk and be sure to define your boundaries of wins and losses rather than see each trade as a potential jackpot.
Typically, most forex newbies do not follow a plan for their trades. Therefore, they usually identify what they think is a good deal, make a few guesses and then place the trade without thinking about the risk or its consequences. They may get lucky now and then, but over time this method will fail.
Beginners often ask how much they’ll make from a potential forex trade, whereas professionals ask what they gain or risk on every trade.
Understand trading psychology
Your mind is both your strength and your Achilles Heel. Books on trading psychology discuss how your attitudes and emotion can interfere with trading – it is valid and has been demonstrated. While many people ignore it, they shouldn’t. Some traders have the habit of going back for “revenge” when they make losses on a series of trades. Their chances of losing now increases due to their clouded judgement. Ideally, traders should take time off after a bad day and take the time to work out what they did wrong and how to keep moving forward.
Again, with the forex market, there is a steady learning curve. The market is always changing and so should you and your methods. Be open-minded and willing to invest in your education and skills. Self-congratulation and stubbornness lead to a slippery slope. Be aware of yourself.
Nothing is guaranteed
The FX market is dynamic and ever-changing. Consequently, living on your past achievements does you no good and your trusted chart or indicator can fail you when you least expect it. You should hope for the best and prepare for the worst. Whatever happens, remain optimistic about your chances in the market and do not let the losses get out of hand, as it could ruin you long-term.
About Salma Markets
Salma Markets is a leading and award-winning forex broker and was recently named “Best Forex Broker Company 2018” by The European. As the broker of choice for professionals and beginners alike, Salma Markets offers a variety of proven trading instruments, user-friendly features, as well as demo and professional forex trading accounts. Discover more at www.salmamarkets.com