With online trading becoming more
accessible, more investors are switching to forex trading as a way to expand
their portfolios. Beginners and expert traders alike are looking at the
financial markets – the forex market in particular – as being lucrative enough
to enter thanks to the wealth of opportunities they offer.
The forex market, however, can be
challenging for beginners. While there are plenty of opportunities to make
money, there are also risks that need to
be mitigated. The volatility of the forex market and the nature of online
trading itself are parts of the challenges. If you are new to forex trading,
these next few tips and tricks will help you conquer the market.
Stick with Regulated Brokers
Not too long ago, we took a closer look at why
experienced traders always use the services of regulated brokers. Regulated
brokers offer the best trading experience and allow
you to profit from foreign currency pairs without additional risks. They are
also more affordable and have a clear pricing structure that you can review
before opening an account.
The challenge now is finding a good broker
to engage, but this too is an easy one to overcome thanks to sites like InvestinGoal.com. The site is filled with
objective reviews of online brokers, including the best forex and CFD brokers
on the market. The way InvestinGoal structures its reviews really helps new
traders understand the brokers they want to engage. We recently discovered that
XM offers a commission-free trading
environment, uses the latest MT5 as the trading platform of choice, and lets
traders open an account with as little as $5 from reading the review of the broker XM. You can
find details like these about your brokers too.
Try Before You Trade
Another great way to avoid absorbing
unnecessary risks is giving the trading platform – and the broker – a try
before investing your real money into the market. There are demo accounts you
can open with every broker on the market. The purpose of these demo accounts is
giving you the opportunity to trade in a live market without any risk.
Rather than using the demo account to play
around, you can actually use it to gain insights on the trading experience
offered by a broker. Set the demo account margin to the amount you plan to
deposit into your real account and begin testing your trading strategies and
Since you are not trading with real money,
you cannot bank real profits. That said, you can spend a couple of weeks
testing different trading approaches and gaining real experience in the market.
This gives you the opportunity to learn
from your profits and losses, preparing you for real trades even more.
Leave Emotions Out
Trading emotionally is one of the biggest
mistakes you can make as a beginner. Unfortunately, it is also recognised as the most common mistake to make. When you trade emotionally, you are
bound to make the wrong decisions and lose a portion of your margin along the
I’m not just talking about chasing your
losses either. Banking big profits can put you in tilt, which will then lead to
you opening more positions without realizing that the market has changed
direction. The result is usually that big profit you just banked getting
completely wiped out.
Chasing losses is even worse when you don’t
keep your emotions in check. You keep opening positions hoping for the market
to turn, only to find yourself losing more of your trading capital. Losses also
lead to you losing the ability to use strategies like hedging to manage risks.
Maintain a Healthy Risk Profile
The more you know about the market, the
healthier your risk profile will be. Entering the market blindly and hoping for
the best is not how you make money in the forex market. You need to invest in
information (i.e. news, financial announcements, etc.) and the right trading
indicators to help you make calculated decisions every time.
To further strengthen your risk profile,
you need to utilize tools such as Take Profit (TP), Stop Loss (SL), and action price. Rather than relying on your quick
reflexes to open a position, for example, you can set a target price for the
position, determine the target profit based on your strategy, and limit your
loss with an SL in place.
Instead of trading without an SL, learn to
use trailing stops to your advantage. You have to keep the trading platform
open in order for the trailing stops to be enforced, but that’s a small price
to pay when you consider how much a trailing stop can limit
your risks in a volatile market.
The forex market doesn’t have to be
confusing. There are a lot of resources to help you learn about forex trading.