Online Forex trading for beginners can be especially tough. This is mostly due to unrealistic expectations that are common among Forex newcomers.
What you need to know is that Forex trading is by no means a get-rich-quick scheme. Forex traders do not get wealthy over a night, week or even a month.
The sooner new traders realise this, the less money it will cost them.
Perhaps the most surprising statistic for newcomers, is that 90% of retail traders lose 90% of their investment in 90 days. Unfortunately, for the vast majority of these traders, the loss could have been avoided.
Let's look at these 17 priceless Forex trading tips for beginners, which can help you avoid being part of the 90% who lose their investment.
You can always try using risk-free demo account to get a better feeling for the market.
Knowing how the industry is mapped out is important, because the collective combination of all participants creates the market you trade in.
The relative weight of the trading party to the market, is measured by how much money that party manages – from billion dollar hedge funds and investment banks to private traders with a few thousand dollars in action.
The initial stages of your trading are about preserving your capital – not growing it. Minimising risk is the primary objective. The easiest way to achieve this, is to use a long-term trading stance.
What casual Forex trading beginners generally fail to realise, is that most successful traders make money from long-term trends. They hold their orders open for weeks, months and even years. This way, Forex works as an investment and less as a lottery.
Long-term trading requires patience and modesty in trading volume.
And as a payoff, it requires fewer hours spent staring at the screen and therefore less stress. Math is obviously useful in online Forex trading, too. And thankfully, there's some simple ways to calculate what balance, leverage and trading volume you need per instrument, to keep your risks in check.
The best Forex trading system for beginners is the most simple one.
Do not overload your charts with indicators and your strategy with handles or switches. The more complicated your trading strategy is, the harder it will be to follow and the less likely it is to work.
Here's an example of one of the most basic Forex trading strategy for beginners:
This is a reversion trading strategy, since one order closing leads to an opposite direction order opening. The strategy is simple and like any other strategy, it's fallible.
Using this strategy is a trending market for example, has the potential to be very profitable. But if used in a ranging market, the reverse is true.
To find out how well a strategy performs on average in different markets, you need to carry out the necessary backtesting and research. Keeping it simple can be a challenge, especially considering the multitude of supporting tools you can apply to your charts.
Just remember – it's not about the amount of tools at your disposal, but it is about being able to use a few tools well.
Forex trading, for beginners or professionals, will require software. Competition between brokers means that most Forex trading software is available for free.
Many Forex trading beginners are also tempted to purchase FX robots a.k.a. Expert Advisers (EA). While some EAs can be helpful, it can be hard for them to stay profitable when the market changes.
And unless you understand the code it's written in, you're probably not going to be able to adapt your EA to work with those changes.
For example, a particular EA could work exceedingly well in a trending market, or wipe out your balance in a ranging market within seconds. If you are one of the many who believe EA would outperform the market, then try it out with MT4 Supreme Edition.
Analysis is absolutely vital to trading. Charts are helpful for both short and long-term trading. You should be looking at daily, weekly and monthly charts.
Any Forex trading guide for beginners of technical analysis will tell you that your main tools are:
Meanwhile, fundamental analysis allows traders to gain an understanding of how one country's news events and financial policies can affect the Forex ecosystem.
Attributes such as minimum deposit and tight spreads are one of the last points to consider when opening a long-term trading account. Pay attention instead to instrument portfolios, execution models and the leverage offered.
The best Forex trading platform for beginners depends on the broker. The best Forex broker for beginners depends on trading system.
What's important is the quote feed which also depends on the broker.
Be cautious of Dealing Desk accounts, unless you are specifically interested in conditions offered by them. Their features usually include momentous execution, fixed spreads and low minimum deposits. This simply means you are trading with the broker rather than through it.
This type of broker can be advantageous, particularly for those interested in scalping.
Volatility is what keeps your trading activity moving. However, if you're not careful it can also completely destroy it. When volatile, the market moves sideways, which makes spreads grow and your orders slip.
Incorporate volatility analysis into your trading strategy. As a beginner Forex trader, you need to accept that once you are in the market. Anything can potentially happen, and it can completely negate your strategy.
For example, the crisis with the Swiss franc in January 2015, ended business for many traders and brokers within hours.
Spreads grow when news is out and before you know it, you are deep in re-quotes and slipping stop-losses. Unless you are a professional news trader, stay away from news trading.
Whether you are a beginner trader or a pro, you are best to trade with what you see and not what you think.
For example, you might think that the US dollar is overvalued and has been overvalued for too long. Naturally, you will want to short and you might be right eventually.
But if the price is moving up, it does not matter what you think. In fact, it doesn't matter what anybody thinks – the price is moving up and you should be trading with the trend.
When learning about Forex trading, many beginners focus on major currency pairs because of their generous daily volatility and tight spreads.
But there's numerous other opportunities – from exotic FX pairs, stocks, commodities and energy futures to indices. There are even indices that track groups of indices and you can trade them as well.
How many markets you scan for opportunities is up to you, but do not limit yourself to one instrument or one market. Market limitation leads to overtrading, so diversify your investment.
A regular Forex trading beginner concentrates on opening a trade, but the exit point is equally important.
If your trading strategy does not consider the mechanism of closing a deal, it's not going to end well, and you're much more likely to suffer heavy losses.
Financial trading is usually a legally regulated activity. Government-assigned regulators of brokerage firms urge caution to Forex trading beginners across the globe.
When checking for secure conditions in investing or trading, three major points to look for are:
Whatever happens, make sure your investment is protected.
Every broker offers a demo account – beginner or not, test every new strategy there first. Not once, not 10 times, not even a 100 times, but until the results are conclusive and you are confident in what you are testing.
Only then should you open a live account and use your strategy in the smallest volume trades available. Be sure to treat your demo account trades as if they were real trades.
A novice Forex trader must develop the mindset of a business owner. Every business requires a business plan, constant monitoring and regular auditing. Jumping ahead without plans and processes is a surefire way to fail.
Starting a trading journal is an absolute must. Everyday, be sure to write the following:
Keep your journal handy as a point of reference when analysing your activity. A journal ensures none of your actions are in vain. Analysis of good trades will boost your trading confidence and motivate you to push harder and go further.
On the other hand, analysis of bad trades will help you extract value and improve.
Generally speaking, the less you know, the more at risk you are, and there is no limit to how much you can know or risk. An endless amount of information is available on the internet free of charge, like:
Want to know how to learn Forex trading for beginners? Read everything and always analyse everything you read – don't just take information in good faith.
As exciting as trading can be, it is still stressful work. There will be a lot of setbacks on your way to the top. Emotions can force your hand to open a trade too early and/or close it too late.
The main cause of stress for beginners in trading is the fact that some Forex trades will end in loss no matter what – it's just the way the market is.
Just remember that war is not won with a single battle. Rather, it is overall performance that counts (which by they way, is another reason to keep a trading journal).
Only one kind of money is good for investing and that's the kind that you are willing to lose. Preferably without damaging your physical and/or mental well being in the process.
An old saying sums up this article:
"Every profitable trader is profitable in his own way, while every loser loses exactly the same way."
We hope this article has given you some helpful tips, toward being a successful trader over the long term. Use every chance you get to learn.