In many ways, it’s easy to see the appeal of the forex market and currency trading for beginners. After all, an estimated $5.3 trillion is traded on the foreign exchange every single day, whilst currency is a derivative that enables traders to profit even in a depreciating market.
However, the margin-based nature of forex trading means that there’s the potential to lose far more than your initial deposit, whilst the market’s volatility also creates significant price shifts within a relatively short space of time.
By adhering to the following dos and don’ts, however, you can get started as a forex trader whilst optimising your long-term chances of success. So, let’s get started:
Do Understand the Importance of Determinism
The peaks and troughs of forex trading can have a significant impact on traders, who may remain at the mercy of emotive decision making without experience or a keen sense of determinism. The latter enables you to understand the underlying laws that govern change in the forex market and make more rational decisions, particularly in relation to longer-term trades.
Do Follow a Trading Plan
If you’re going to succeed as a forex trader, you’ll need to have a clearly defined plan and a strategy that enables you to thrive in real-time market conditions. Many of these can be formulated as you continue to learn about the forex market, whilst the use of demo accounts through trading platforms such as ATFX enables you to apply these practically in a simulated and risk-free environment.
Do Manage Your Expectations
We touched earlier on the subject of emotive trading, which can also impact on your expectations as an investor. More specifically, large returns and successful trades can create an unrealistic perception of the market, and it’s important to remember that loss and failed orders are both part and parcel of every trading experience. This is why you should also always risk management measures such as stop-losses to protect your capital in the worst-case scenario.
Don’t Listen to Rumours
Make no mistake; the forex market is one of the most watched and studied in the world, and in the age of social media it’s not unusual for various rumours to come out during the course of the trading day. You should strive not to listen too closely to such speculation, as it’s far better to use reliable news sources and verify any information wherever possible.
Don’t Be Greed
Whilst greed may have been a small factor in your decision to trade currency, you should never let this become your master. The reason for this is simple; as an excess of greed can undermine your patience and cause you to become an undisciplined investor who makes decisions based on the potential return rather than the viability of the trade.
Don’t Revenge Trade?
The term ‘revenge trading’ refers to emotional reactions to losses, as you look to chase these and recover your lost capital. Whilst it’s only natural to want to recoup as much of your lost capital as possible, it’s always important to remain in the ‘now’ of the trade and execute orders based on their own individual merit.
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