Forex is the largest market in the world in terms of trading volume. While some may have profited from it, it has also caused large losses to many inexperienced and undisciplined traders over the years.
Here are some of the tips that you can use when trading Forex:
Practice before you go live
People are often fascinated by the Forex industry and they do not want to waste their time practicing. They believe this market is easy and they can win money all the time. There is no movement or trend as the chart is always showing up and down of the price level of the currency pairs. If you think like them, you will find there is no signal or trend that you need to analyze. This a common misconception and it is why many people do not practice in demo trading account. They deposit money and start trading in the live account.
Imagine what will happen if you do not practice. You cannot understand the trends, how the volatility is changing and all these will effect on your trading performance.
Know your risk tolerance
Just like in any other kind of investing, Forex has also risks. In fact, it is one of the riskiest as you can lose huge sums of money in an instant. After you’ve practiced in a demo trading account, the next thing is to examine your risk tolerance. Make sure that your risk tolerance and capital allocation are not excessive. Only invest and allocate money that you can afford to lose.
Start with small sums of money
As the saying goes, ‘great things start from small beginnings’. You must begin your live Forex trading with a small amount and low leverage. Grow your portfolio organically by reinvesting the generated profits. In general, the lower your risk, the higher your chances, so always make your choices in the most conservative way possible.
Focus on single currency pair
With a lot of currency pairs Forex trading platforms offer, It is hard to master all the different kinds of financial activity in each of the pairs, so it is a great idea to restrict your trading activity to a currency pair which you fully understand. If the currency of your country is liquid, consider that as your first choice. If not, try sticking to the most liquid and widely traded currency pairs.
As you go along with your trading activities, take note of what works and what doesn’t. Find a good mentor that has vast experience in trading. Take note of his strategies and try to implement it on your own trading activities.
Practice money management. Once you make profits, it is time to protect them. Don’t get caught by greed by gambling it away in the hope of increasing your profit more. Money management is all about minimization of losses, and maximization of profits.
In one of the seminars I attended, one of the rules in investing is to keep your money moving’. If you’ve made gains from high-risk trading such as Forex trading, move your gains to medium-risk investing. If you’ve made gains from medium-risk investing, then transfer your gains to low-risk investing.