Did you know that anywhere between 70%-90% of forex traders lose money and quit?
Many start trading forex because they think that they’ll be able to make money quickly. While it is possible to make money, you have to put in the work.
Do you want to know how to trade forex and be successful? Follow these forex trading tips.
1. Set Forex Trading Goals
What are your goals for trading forex? Your likely response is “to make money.” That’s all well and good, but you need to be more specific than that.
Trading goals help you learn the art and science of forex trading. You’re more consistent and focused. Most traders that have specific goals find that they’re able to learn faster and they stick with their trading plan.
Beginners shouldn’t set monetary goals at the start. That’s because you’re likely to lose money and make mistakes. You’ll get frustrated and decide to quit.
Focus on learning goals, rather than the outcome. For example, you can focus on stop-loss objectives. That can help you learn the concept and know when to execute stop-loss in trades.
2. Understand Your Risk Tolerance
You have to have self-awareness to be a good trader. The best thing to figure out before you start trading is to know your level of risk tolerance.
If you have a high tolerance for risk, then you’re likely to make aggressive trades for more money. Lower risk tolerance means that you’ll gravitate towards small trades for a little bit of growth.
3. Choose a Good Broker
You need to have an account through a forex trading broker to get started. You’ll find that there are hundreds of websites that offer forex trading. Not all of them are legit.
Governments around the world have tried to put a stop to the scams through regulatory measures, but that hasn’t stopped them.
You need to do your homework to make sure your broker is legal and won’t rip you off.
The first thing you need to do is to make sure they’re registered with a regulatory body. In the U.S., a broker needs to be registered with the Commodity Futures Trading Commission. In the UK, the Financial Conduct Authority oversees brokers.
Another thing to look for is a guarantee to make money. A broker cannot make these claims and guarantees.
Finally, look for a broker that offers a practice account. You’ll be able to make trades and practice trading strategies without losing money.
4. Experiment With Trading Strategies
There are a number of trading strategies that you can put to use. You’ll want to experiment with different strategies in your practice account.
You’ll learn that there are some strategies that work better in certain situations than others. For instance, if you’re a part-time trader, or if you have a low tolerance for risk, you’ll want to use stop-loss trading strategies.
In stop-loss, you tell the broker to sell a trading pair if it reaches a certain price point. This lets you minimize your losses without spending all day looking at the markets.
5. Look at All Possibilities
Forex trading is a bit like playing chess. You have to step back and look at all of the potential outcomes of a trade. You can (and should) go down the rabbit hole of asking a series of “what if” questions.
You’ll be better prepared than most of the other traders because you took the time to see a certain scenario develop. You can calmly respond to the situation rather than trade based on an emotional reaction.
6. Mark the Big Events
Serious forex traders have certain days on the calendar marked off. You should know when the next economic data reports are published, where and when financial officials like the Treasury secretary or the Chair of the Fed are speaking, and when major gatherings like the G7 Summit are held.
These are newsworthy events and they’re going to have an impact on the markets. These are opportunities to make money. Take a look at the forex trading charts to see how the major pairs react to these events.
7. Protect Your Profits
Gamblers like to push the limits of winning money. They’ll make some money on a slot game or poker table and they’ll keep going until they lose their winnings.
You may be tempted to take the same approach to forex trading. Don’t do it because you will not make money.
One of the key principles for beginners to learn is to protect your profits. This means quit while you’re ahead. You can take a portion of your profits and trade it, and leave the rest aside.
8. Look at Other Influencers
This doesn’t mean that you have to hop on Instagram or TikTok to see what other traders are doing. You need to know what other factors influence the forex markets.
There are big events like economic announcements, but there are other markets that have an impact on forex pairs.
The major stock markets to look at are the FTSE (London), NYSE (New York), DAX (Frankfurt), and Nikkei (Tokyo). You also want to look at bond markets and commodities markets such as oil and gold.
These markets tell you what a currency is doing now and what the trends are. If you see the U.S. dollar climbing, the price of gold falling, and 10-year bonds rising, the markets are agreeing with the dollar’s climb. It’s more likely to stay strong.
On the other hand, if you see the dollar jump and bond markets remain flat, the gains of the dollar are likely to come back down quickly.
9. Maintain Your Focus
Do you want to trade in random currencies like the Gibraltar Pound? You can trade with so many currencies, it’s easy to get distracted.
Beginners should focus on a couple of trading pairs and master them. You’ll get a good feel for the pair and see trends emerge.
Make Money With These Forex Trading Tips
The forex markets are easy to understand, which is why beginners start investing in forex trades. There is a lot more to understand than whether or not a currency will go up or down.
These forex trading tips help you understand why a currency will go up or down. That’s how you’ll be a successful trader.
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