Navigating your way through the world of foreign exchange (Forex) as a neophyte can be a daunting prospect. As with any potentially high-profit form of speculative trading, there can also be great losses if one is not prudent and well informed as to the basic nature of the market in which they want to operate as a Forex trader.
In this post, we’ll outline a few key pointers for getting started in Forex that are sure to stand you in good stead.
1) Know your market and spend time analyzing its behavior
This is perhaps the most important step you need to take as a new Forex trader. When you study the market, you can a feel for patterns of market behavior. Being sensitive to the movements in the market means that you can make wise decisions as to currency pairings based on solid market analysis. This will serve you better than choosing currency pairings or deciding to enter into trades on a whim; this is how big losses occur in the world of Forex! It’s better to stay informed of market activity by paying close attention the financial news, read the Forex blogs and try to always keep a “big picture” view of the financial markets and international news; economic meltdowns in the Euro-Zone have obvious consequences if you are intending to trade in Euros!
2) Develop a powerful strategy combination
Although it is important to underscore your trading decisions with factual analysis, technical signals alone have only a 50% success rate, which, if amplified long-term over high yield trades, equate to large losses. That’s why it’s important to incorporate a trading strategy or a combination of strategies you’re your trading manner. Your trading strategy should combine technical know-how and market analysis with a tried and tested system, such binary-option, Price Action Trading or an algorithm. There are many excellent trading strategy resources on the internet for the new forex trader.
3) Control your risk exposure
Now you have an intelligent, working knowledge of the foreign exchange markets and a strong combination of strategies, you need to make sure that your risk exposure is addresses appropriately, as this can cause serious damage to your both your trading capital and trading profits. The best approach to avoiding this is through controlling your risk exposure through various practical methods. By applying these stopping measures, you will give yourself a tighter level of control over your trading, protecting your profits and minimizing your losses. Using a method like Position Sizing, which vary your trade size according to the current trend, and Stop Placemen, which incorporates indicators into stop loss placement, will increase your safeguarding. Will protected trading profits and capital, you will also be increasing your trading longevity.