Out of all the markets, none seem to be more attractive to beginners than the Forex, and it’s fairly understandable. Most people have a basic understanding of currencies and how currency rates work, and the prospect of being able to trade on fluctuations might seem pretty straightforward and easy to grasp compared with other options. However, simple doesn’t mean easy, and many people end up getting burned early on and disillusioned by currency trading as a result. In this article, we’re going to give you some of the do’s and don’ts every beginner trader should follow.
Do Make Sure that Your Account is Not Undercapitalized
While the Forex has a pretty low cost of entry, you have to make sure that your account is never undercapitalized. There are many reasons for this. For one, a sound risk management strategy dictates that you should never expose more than 3% of your account’s total size on any trade. Second, just one bad decision could end up eating up all that margin, which might push traders to expose even more of their assets in order to chase after another opportunity. Third, with an undercapitalized account, your stop orders will simply not be wide enough to identify trends properly and you might end up choking trades and stopping them prematurely.
Don’t Follow Rumors
One of the biggest mistakes that people make when trading via Forex at the beginning is putting too much stock into floating rumors. While global events and important news may have a direct effect on currency pairs, you shouldn’t take every word from news outlets or financial columnists as gospel.
When people get overwhelmed by the flood of information, it can be easy to go for the rumors as they may seem comforting, especially if things have been stagnant lately. Whether it’s reputable news sources of financial experts, always know that they too go by assumptions and there’s no absolute certainty when it comes to the markets, so never go by hearsay or rumors.
Do Go with a Broker with Multiple Funding Options
When comes the time to pick a broker, flexibility is essential. You not only want a broker that supports a wide variety of currency pairs, works well on multiple platforms, and offers good leverage, but you also want to go with a broker that allows you to withdraw and make deposits through a wide variety of methods.
While most brokers will allow payments through wire transfer or credit card, you should also go with brokers that accept PayPal. PayPal is bar none one of the safest ways to transfer money online. It’s extremely fast, and very convenient as well. If you’re looking for a service that allows the option, you can click here for the list of brokers who accept PayPal.
Do Adjust Your Expectations
Everyone gets into Forex trading with a certain expectation of how the market will perform and how much they will win. However, it’s important to remember that the market can be extremely unpredictable, and you never know what may happen next. Develop a detailed plan and track its progress carefully. You should then keep to this plan and avoid veering away from it when you get frustrated that it’s not working. If you’re not getting any results, re-evaluate your plan and try something new.
Do Ensure You Know What You’re Doing
As with any new venture, you need to ensure you’re fully clued up before getting started. This is especially true if your money is involved. Study the Forex markets in depth and take advise from other traders – you should easily be able to find some reports online that will help to guide you. This will also help you to develop a structured plan as mentioned above. You will build up most of your trading knowledge with experience, but if you want to succeed you need to know the basics. Learning never stops and just because you have one or two wins doesn’t mean that you know all there is to know.
The best technique would be to start of small so that you don’t lose too much. As you become a more experienced trader and feel fairly confident in what you’re doing, you can gradually start to increase the amount you’re investing. Track your spending in a spreadsheet and if you feel that you aren’t putting too much at risk based on previous performance, up the stakes to an amount that you feel comfortable with.
The Forex does have its fair share of advantages, and when approached correctly, it can be a great option for those getting started with the markets in general. Just make sure that you follow these few simple tips if you want to start your trading career on a solid foundation.
