10 forex trading tips for beginners
|1. Rule number one: practice makes profit|
|2. Open a free trading account – duh!|
|3. Jack of all trades, master of none|
|4. Check your numbers & check ‘em often|
|5. Strive to trade like a Zen monk|
|6. Avoid the get-rich-quick mindset|
|7. Analyze… a lot!|
|8. There is such a thing as too much leverage|
|9. Use these magic words: stop-loss limit order|
|10. Learn how to overcome emotional investing|
Marhaba and welcome to another trading guide from amana. This time, we’re bringing you the best forex trading tips for beginners. The most successful forex trading experts are those who have put in the time and effort to become experts. And as part of their self-reflection process, they learn how to keep fear and greed out of their trading decisions. If you want to become a successful forex trader like them, then you should master those skills, along with some others. So, let’s dive right in!
1. Rule number one: practice makes profit
Even though it might not be rocket science, trading foreign currencies or FX can be incredibly tricky and requires much specialized knowledge. For example, the leverage ratio in forex trades is higher than in equity trades. Also, the factors that move currency prices are totally different from those that drive stock prices.
So, our number one advice on this list is to practice, practice, and practice some more using a free trading demo account. Or get ready to lose a lot of money.
2. Open a free trading account – duh!
Of course, you'll need to open a brokerage account before you can start conquering the FX market. Forex brokers don't charge commissions. Instead, spreads between the prices of buying and selling, also called "pips,” are how they make money.
3. Jack of all trades, master of none
Being the jack of all trades in renovating your house is fantastic. But not so much when it comes to trading. Even though you can't predict how the market will move or when it will move, narrowing down your specialty will help set you up for success and define a clear road map.
A good trading strategy depends on who you are and how much money you have. But most of all, it requires focusing on a specific market. Instead of keeping up with all forex market news, try and focus on the markets you're most comfortable with and learn to specialize in them.
4. Check your numbers & check ‘em often
That’s right – before you do anything, always check your positions at the end of the day. Most software for trading already keeps track of trades, but you should ensure you have enough funds in your account and that you don't have any open positions that need to be filled.
Another thing you can do to keep your numbers in check is to perform weekend analysis. Take some time over Saturday and Sunday to study the news and look for patterns that could affect your trade in the week to come. You can also use forex analysis tools, such as Autocharist, to stay on top of your numbers, AKA top of your game!
5. Strive to trade like a Zen monk
Want to know how to master trading psychology? Well, there’s tons to say about that, but here’s one crucial tip for now. Success at forex trading is all about opening and closing your positions at the right time. But if you think about the end result, you’ll get disoriented and make the wrong moves.
So, it's critical not to be made jittery by your trading positions and to maintain your cool in both profits and losses. Be ready to lose the battle occasionally and accept small losses when necessary. Trading right is all about learning how not to get too attached and stop expecting your trade to result in a specific way. Stay calm, stay zen and find beauty even in the small wins.
6. Avoid the get-rich-quick mindset
Can forex make you a millionaire? It sure can! But chances of that are pretty much one in a million. Beginner traders sometimes make the mistake of thinking forex is an easy way to get rich quickly. But you should always consider the risks involved and the hard work it takes to get there.
You'll probably be unsuccessful in the long run if you try to make a huge profit by making trades too big for your account balance. Sooner or later, a trade will trip you up and leave you with huge losses.
7. Analyze… a lot!
Before entering any market, you should know where you want to open and close a position based on your favorite method. By researching and making informed decisions, you can focus on your plan and stop second-guessing yourself.
For example, if you're using a weekly chart trading strategy for the trading direction and a daily chart for entry, make sure to synchronize both charts. If the weekly chart gives you a sell signal, wait for the daily chart to confirm the same signal. Having stop loss orders in place can also help you lose less, but more about that later.
There are three main forex market analysis types: fundamental, technical, and weekend analysis. Find the one that works best for you!
8. There is such a thing as too much leverage
Many traders are into the forex market because they can trade on margin, also called “leveraged trading.” They put down a small amount, but thanks to leverage, they can open big positions.
Is leverage trading worth it? It can be! Forex is usually traded with a lot of leverage, which means you can invest only a tiny portion of the amount you want to sell yet still make or lose as much as if you’d invested the entire amount. This can both help you and mess up your trade entirely. BUT there’s still a high chance that you could lose as much as or even all of what you put in at the start. You could also lose more than you put into your trading account to begin with.
9. Use these magic words: stop-loss limit order
Some traders keep losing positions for a long time because they think or hope the market will turn around. They also tend to get out of winning positions too quickly to make a quick buck, which takes away the chance of making even more money.
Even though it may be tempting to think this way, you must have the patience to only enter trades that you consider good chances. You must also have the discipline to quickly get out of a trade if it goes against you or keep going if you believe in it.
Most importantly, set a stop-loss order when you open any trade. If the market falls to an unfavorable point, your trade will automatically close, and you can stop any further losses. That way, you’ll lose only what you’re willing to lose – like magic.
10. Learn how to overcome emotional investing
Did you know that emotional trading (greed or fear) is the main reason so many people buy at market tops and sell at market bottoms? As we said before, staying calm and balanced is essential to keep your mind on what's important. It would help if you never forgot that most market movements are outside your control, and you can only do so much.
We know it's easy to say but hard to do — especially when making a quick decision. Try not to trade based on your feelings, and remember everything you've learned. Sticking to your guns through short-term volatility is the key to long-term success.
Forex trading can be not just profitable but also incredibly fun. That feeling when you’ve doubled your investment is exhilarating. But all this can only happen if you do it responsibly and with the right tools and forex trading strategies. Unfortunately, most new traders don't spend enough time learning the basics of Forex trading. Instead, they jump into the deep end and start placing trades without understanding how to do it correctly.
You should head over to more free forex trading guides and use a risk-free demo account to get used to the trading platform to get yourself ready. It would be best if you also kept looking for daily forex trading news and tips to avoid the common mistakes beginners make. Ready to learn more? Dive into our Learn section, or follow us on social for more tips and hacks.