The majority of individuals who choose to begin trading the foreign currency exchange often enter under a misapprehension. It is a general belief that forex is nothing more than a numbers game, a simple buy and sell trade. This is an incorrect perception and one needs to understand more of the market if you are to succeed. This article outlines some guidelines on not only the market details but also the do’s and don’ts to follow when trading.
What to do on the Foreign Currency Exchange
When new traders enter the forex market it is best to focus on one or two specific currency pairs. The first should ideally be one of the four major currencies as the market movements of these are more well-reported and simpler to track. By focusing on these pairings you will be able to improve your trading strategy without overwhelming yourself with too much information at once. You will also be able to follow other more experienced traders and examine their behaviour in the market regarding the chosen pairings. This is vitally important as one can gain valuable information from these traders.
Another ‘do’ to consider is your trading training. Many new traders enter the market immediately after opening their forex trading account without much knowledge of forex. Limited knowledge and skills in forex can lead to some ‘luck’ profits, however these profitable trades will be minimal and the trader will experience more successive and damaging losses. It is important to continue studying and honing your skills throughout your trading career. There are various free trading tools online which can assist in gaining further insight into the market. By talking to traders in online forex forums you will also learn tips and strategy information from more experienced traders and forex professionals.
The final ‘to do’ is linked to honing ones skills and gaining practical education before trading on the forex live market. This is developing a trading strategy and using it via a demo account. This is a forex tool whereby you will be using a forex trading platform to complete real trades using virtual currency instead of real currency. It is the ideal arena to test trading strategies and determine whether you are ready to be a forex trader.
What not to do on the Market
While it is important to understand what one must do to be an effective forex trader, it is equally important to note what behaviours to avoid. The first ‘don’t’ is to realise that the forex market is a stressful, high-paced environment that is not guaranteed to earn you millions overnight. Many traders do not earn a steady income from trading. If you choose to trade forex you must be realistic about your goals, this is the only way to survive the forex market.
A further aspect which should be avoided is trading on untested live trading platforms. Online trading platforms vary in levels of complexity and some are highly integrated offering more than the basic features of placing orders and limiting reports. It is vital one tests the platform to familiarise yourself with the workings or face the chance of being confused when it comes to trading live. This will undoubtedly lead to damaging losses.
Finally, don’t be emotional. On the forex market, trading on emotions can lead to more losses than profits.