Four things you should be doing as a Forex Trader
Forex trading is a practice that requires caution, confidence and thorough knowledge of the industry. It is not only important to understand how trading works but to also acknowledge the risks that it brings. Whether it’s certain developments that affect currencies, exchange and interest rates, liquidity and leverage or a simple human error factor, a trader should always incorporate risk mitigation in their strategy. Below are a few helpful ideas that can help you in your daily trading.
Stay up to date on all industry developments
The more knowledge you have, the easier it will be for you to form a successful trading strategy. Make a habit of reading news sites such as DailyFX, following influential Forex leaders, and browsing objective reviews. Try to find different opinions and use them to form your own view of the industry. The more information you allow to sink in daily, the higher the possibility that you will be able to make correct predictions and protect your investments. Go to sources that you trust and analyse market movements so as to always stay on top of all changes.
Keep your expectations realistic
The term Forex is known to be associated with easy money. We are constantly hearing about new success stories and Cinderella-like roads to riches, that start forming an impression that you will automatically earn millions if you get into trading. The reality is a bit different. To win the lottery, you have to go and buy a ticket. Without that, you simply cannot win. Forex is the same. If you want to succeed, you need to do the work and have patience. It might take some time, but if you set your mind straight and understand the realities of the industry, you will be able to achieve your goals.
Take justified risks
Invest only if you have the money for it. If you are barely making ends meet, putting money into Forex is really not a good idea. According to a study conducted by Forex Illustrated, the average percentage of losing accounts is 77%. This means that only 23% of investors make money from trading. Now, of course, it is always great to be optimistic and confident, however, do remember to still be honest with yourself. If you want to trade, set aside extra money that will not influence your everyday life and that you can afford to lose. Don’t invest all of it in one trade, divide it into smaller trades, don’t overcompensate your losses, and use Stop Losses and Take Profit. Make sure to use different currencies too!
Choose the right FX broker
The number of Forex brokers today is multiplying by the minute, thus making it difficult to choose one. Learn who is backing each brokerage and what leverage they provide. Remember the higher the leverage, the higher the risk, so try to find a broker who offers lower leverage. Make sure that the broker’s foundation is strong before you trade with them and that it is registered with the Futures Commission Merchant (FCM) and regulated by the Commodity Futures Trading Commission (CFTC). Check the spreads – The smaller the spread, the bigger the trader’s profit. Analyse what platform the broker is using if it is up to market standards and includes features like technical analysis, real-time charts etc. Try a demo at first if possible, to understand if the platform works for you.
Forex isn’t something to be afraid of. It is, however, something to be prepared for. Just like anything else, you need to work and learn to succeed. Be realistic about your abilities and the health of your financial status. Don’t rush and take things at your pace. As Benjamin Franklin once said – “He that can have patience can have what he will.”
Author: Nadia Ivanova, PR & Digital Marketing Manager at Qobo Group Ltd