As a beginner in Forex trading, there are certain important things you need to keep in mind. These things will ensure you do not view Forex trading from a very wrong perspective. They will also ensure you make something tangible out of Forex trading. Check below for these very important facts.
Not just any broker
You cannot depend on just any broker when trading Forex. Truth is brokers are not equal. Choice of broker can make or mar your Forex trading successes. A broker can either drive you into profit or drive you into losses in Forex market.
Different brokers operate differently. They equally have different forms of customer service and support. Pip spread equally differs from one broker to the other. You have better chance of making lot of profit in Forex trading if you partner with those brokers that have more connection to the big Forex market makers.
The simple strategies are the best
Never include multitude of indicators on your trading platform. You can do better in Forex trading with the simple strategies that involve one or two indicators. Best way to actually make it in Forex trading is not to use too many indicators on your trading platform. You can read the full review of the Trade Ideas platform to see if it is a good fit for you.
Truth is things can get even more complicated if the numbers of indicators you use are too many. It is better to keep the strategy simple. Make sure it is easy to understand too. The best strategy is one that is very easy to stick to.
The strategy should be very easy to the extent that a complete rookie in Forex trading should be able to understand it. If this is not the case, it only indicates that the said strategy is too complicated.
Copy trading is where you deposit to a copy trader platform such as Etoro or Zulutrade and you can follow other people’s trading decisions. eToro copy trading gives you a free practice account which you can use at any time, so use it! You can still run your real account alongside the practice account.
Do not overtrade
One of the common mistakes many traders make in Forex trading is to overtrade. Do not see every second you spend away from the Forex market as a waste or loss. Also, do not enter multiple positions too often except you are very sure of what you are doing.
Opening too many positions does not necessarily guarantee increased profitability. If you lose a particular trade, it is suicidal trying to take your revenge on the market by overtrading. This is because you may not think it through before making more moves. It is also not safe to hold a trading position for too long. This will only lead to increased loss.
Do not join the losing bandwagon
There are facts on ground that up to 95% of Forex traders end up losing their investment in the very first 6 months of trading. This is mainly because many of the newbie see Forex market as a pot of free gold lying around for them to pick up.
Many people go about telling stories of how to make it easily in Forex trading. These individuals will never tell you of the dangers and challenges involved. Many newbie traders listen to these stories and believed in them too much to their own peril.
Consequently, they end up joining the losing 95%. You may end up with the losing bandwagon if you fail to learn about Forex trading properly before investing real money.
Accumulate little profits.
Many Forex traders feel they can double their investment in Forex within 24 hours. They have heard stories of people doing this and they too want to do it from the word go. You must be ready to compound small gains if you want to be a successful trader.
Do not exact instant profit. Instead, analyze the market and make traders that will give you series of small profits. These small profits amount to much at the end of the day.
You can start Forex trading with very little capital and be able to make it big in a couple of years if you only trade for small profits per trade.
Forex market is controlled by banks
Yeah, the banks are the big players in Forex market. Their clients mandate them to hold their cash for them and also buy foreign currencies on their behalf. Banks equally depend on the deposits made by customers to invest in Forex and increase profit.
Truth is that banks are responsible for up to 70% of all the activities that occur in Forex market daily. Other participants like you and I only have about 20% slot.
Stick with the major pairs
The major currency pairs are USD/CHF, USD/CAD, AUD/USD, EUR/USD, GBP/USD and USD/JPY. These are the currency pairs that give more profit. For one, the pip spreads on them are the lowest.
Secondly, pip value is higher with these pairs compared with other pairs. These 7 are involved in over 85% of the trading activities going on in the Forex market. You have got to stick with these major pairs if you want to make meaningful profit in Forex market.
Two main countries involved in Forex trading
The United Kingdom and United States are the two major countries where Forex trading has more influence and popularity. This is why New York trading season and London trading season are the most volatile.
There is bigger chance of making good profit if you trade during either of these sessions. Up to 34.1% of global trade in Forex market is generated from the United Kingdom. The United States on the other hand contributes up to 16% of Forex trading activities.
You need discipline
No Forex trader can succeed without proper discipline. This is where money management comes in. It is in your best interest to develop a workable money management strategy. In fact, a trading strategy is not complete if you have not added money management strategy to it.
Do not expect instant riches in Forex trading; there is rarely anything like that. Many see Forex trading as a get rich quick scheme, while some other individuals see it as some kind of lottery. No one with this kind of perspective ever make it far in Forex trading.