Every year a hoard of new people try their hand at learning how Forex trading works. It’s an exciting process, and it offers deep market liquidity. Currency values are constantly shifting, which opens up plenty of opportunities for traders to earn from their investments — provided, of course, they do it right.
But the trading game can be daunting too. For better chances of success, consider following these useful tips.
1. Educate yourself
It would be foolish to go in blind when there are risks involved in currency trading. Take the time to learn all aspects of the trade, and not just simply how to buy or sell a currency pair. There are a lot of things you need to familiarize yourself with, such as strategies, candlestick charts, and much more.
One option is to get formal training. Attending Forex trading seminars is a good way to help you gain a better understanding of the process. It also serves to connect you with other traders who can give you advice and valuable insight.
Another area you need to educate yourself about is current events, which can greatly affect the performance of key currencies. In its discussion on the history of the Euro, FXCM explains how it is affected by various factors, from political events, to natural disasters, to acts of terrorism. The Euro is the second most widely used currency in the world, and is used by over 19 countries. This means that every small movement of the currency can affect millions of people, and vise versa. World and regional events have a major impact on the value of currency. As a trader, you must stay updated on the latest news as well if you want to make successful trades, not just on the EU, but with other currencies as well.
2. Look for a reliable broker
Be careful when choosing your Forex broker, as there are many scammers trading on the market. Before placing your trade, scour the web for any reviews or articles before you invest your money in them. Take note of the platform your broker uses, as well. Make sure that their platform suits your preferences, especially when it comes to your strategy.
Trusted brokers usually provide quotes in real-time as well as advise on what currencies to buy. They will even go the extra mile to send you educational info on Forex trading, a service that newbie traders can greatly benefit from.
3. Keep track of your trades
After doing your research and choosing a reliable broker, understand that there is no shortcut to becoming a good trader. While these will prepare you for the basics, keeping an open mind and constantly evaluating your own trading strategies and their outcomes will make you grow even more.
In truth, you can learn a lot from your previous trades if you have them recorded in a weekly journal. The data you keep can help you analyze your areas for improvement and formulate a better plan for your next trades. The Balance’s guide on weekly journals suggests using pictures instead of written records. Screenshots of charts allow you to annotate key points, thereby providing you with visual proof of how you perceived the market on a particular day. This is much easier than jotting down notes that may not tell the entire picture when you return to them later on. Make it a point to review your journal at the end of each week and month to clearly understand your strengths and weaknesses.
4. Trade on higher time frames
Many often think that they can earn more if they focus on lower time frames. Seasoned traders know that it’s less stressful to trade on higher time frames, because they give you more time to make decisions. You have room to calculate your trade parameters, for instance.
This is not to say that you cannot profit from low time frames, of course. You still can, but it is generally more reliable to get trading directions from high time frames.
5. Consider currency futures
Business Management Ideas defines currency futures as contracts made to buy or sell a set amount of a particular currency at a specific date and price in the future. You can use these contracts to manage risks that involve currency fluctuation. However, currency futures are highly risky themselves, which is why you need to learn how they work. Your knowledge and predictions on currencies are crucial in making these contracts effective.