Forex trading is one of the best ways to earn additional income and improve your financial situation. Even if you are already working on a day job, you can still trade part-time. As a trader, you can enjoy several benefits including ease of entry, 24 hours trading, and a huge market with very high profit potential. In addition, you only need very little capital to start. Although trading in forex has its risks, you can still learn to trade successfully. Here are some of fundamental guidelines for new forex traders.
Set a Profit Target and Be Disciplined
You must adopt a disciplined approach to FX trading from the onset. Learn to set a target for profit and take it when it occurs. Don’t be greedy and keep waiting to maximise profit because you are anticipating a wider spread. You must realise that a positive trend can turn negative immediately because of an event you know nothing about. Always bear it in mind that successful traders will stop and take profits when they materialise.
Learn the Basic Principles of Successful Trading
You stand a greater chance of making money regularly if you take time to learn the basics of forex trading. The first step is to get a comprehensive beginners guide on this subject. Study it carefully and follow its guidelines to the letter. Then begin with demo trading so you can learn the basic strategies without using any real money. Thereafter, you can start trading with a live mini forex account. Trade with this account until you have started making consistent profits. Then you can ask your broker to open a standard account for you.
Trade with High Liquidity Currency Pairs
It is important to trade with currency pairs that have high liquidity. These will be available for trading whenever you have time to trade. If you are still working on a full time job, you will only be able to trade in the forex market actively very early in the morning and late in the evening. Therefore, you should trade with major currencies with high liquidity like US Dollar, USD, British Pound GBP, Euro EUR, and Japanese Yen JPY. That means you should learn how to trade currency pairs such as USD/GBP, USD/EUR, USD/JPY, USD/CAD, USD/AUD. All these pairs would be readily available for trading 24 hours a day, 5 days a week.
Use Automated Trading
Before you learn to trade a like a professional, you should use automated forex trading software to complement your efforts. Many automated trading programs are available online. Some of them simply provide a platform for you to order a trade. But there are full-featured programs that monitor the real-time value of currencies, allow you to impose trading limits, help you to discover profit spreads, and order a trade. One of the benefits of trading in the foreign exchange market is that you can use a reliable automated trading program that takes critical decisions for you while you simply set your trading parameters.
Minimise Your Risk
As a forex trader, it is vital to guard against loses and maximise your gains. One of the best ways to accomplish this is to set stop-loss. This is a fundamental principle of good forex trading. When you adopt this principle, you minimise your losses and preserve your capital so you can continue trading on another day. Technically, a stop loss limits the number of pips you are allowed to lose. For instance, after you buy a lot of EUR/USD at 1.16000, you can set your stop loss at 1.15980. Hence, you will only lose 20 pips. Always set your stop loss and don’t rely on manual chart monitoring.
Forex trading can be a successful way to improve your personal finances if you adopt the right approach from the start. Although there are no set guarantees of profit for each trade, you can minimise losses and increase your chances of success by following the guidelines provided here.
Image credits to : Jim Makos