Are you thinking about giving forex a shot this year? We know the market and this whole business is quite intimidating.
This is why we have put together a list of some basic things every trader should keep in mind when entering forex.
Let’s get right into it.
#1-Consistency in risk management
Manage risk and stick to those rules from the very start. 1% risk is the recommended level. Make a trade plan and risk management strategy and create a structure for yourself to follow.
The more systematic you make your trading, the more chance it has of becoming sustainable. Another great thing it achieves for the trader is emotional detachment.
When you begin to treat trading like work and a process, you will eventually be able to tune out any rash impulses or unsound moves.
#2- Indicators and signals are meant to assist you, not trade for you
Any indicator you use, even a signal, should be used only as an assisting factor. Ultimately the analysis should be yours.
An important reason for this, apart from the fact that indicators won’t always be accurate, is that a skill that you learn yourself is much more valuable to you in the long run.
Your brain is your biggest asset, so the more you refine it and train it in the skill of trading, the more you can benefit from it later.
#3-Adopt sustainable strategies
For stability of your account and your mind, you need to trade in a way that you can follow through in the future as well. Ultimately, progress matters only if it is sustainable.
Making a quarter of your account size in a month or so might not be easy for you to sustain. As a result, when you start aiming for those high levels you want to take on bigger trades than you can afford and risk more too.
Unfortunately, the forex market is quite unpredictable and if a risk turned in your favour once does not mean at all that it will be the same again. So, safe sustainable growth is the way to go.
#4- Have a plan for exit should things go wrong
Think about your options and potential moves for managing losing trades ahead of time. No trader is a 100% profitable.
So when you are faced with a situation in which you can see you’re losing money, if you have a plan of action already in place it will make things a lot less stressful.
For example, are you going to get out as soon as possible or are you going to stick around and wait for the situation to improve? You can set some measures to help you decide between these two options too.
#5- Learn from other traders
You can look into online trading communities. Talking to other traders can do you a world of good.
It can introduce you to new and better strategies, you can find great tips, and most importantly it builds a sense of community and serves to lessen the sense of frustration and isolation one can face sitting in a room alone looking at charts all day.
So talk to others and learn in a group. It is a great way to get into the right trading mindset and also figure out the kind of trader you are or want to be.
#6-Demo account doesn’t cut it.
While demo accounts are helpful in that they can show you how to use the software and make you familiar with what you will be seeing on charts, it’s not the real deal.
It doesn’t give you an insight into the psychology of trading and the emotional management that goes into it. Both these things are incredibly important.
You should absolutely start with this but brace yourself for the real market which will surely prove to be a lot harder.
It’s like any other business or skill. It takes time to become truly lucrative and become sustainable. Don’t rush it.
Consistent profits might not start coming even a year or more into starting an account. This is why you should go in with an account that can handle some losses without financially crippling you. Invest what you can afford to risk.
You will pick up a lot of little tips and tricks that you will then use in your strategy. It takes time to hit upon the style that works for you and that you are good at.
Give it that time and don’t take your losses personally. It happens to everyone.
That is it for our list. We hope it was useful. Remember that forex is not a magic spell. It is work like any other business. You have to put in the hours and the energy. So be prepared for all of that.