10 Important Tips Before Your Forex Trading

Overview

Introduction

5 Common Mistakes Forex Traders Make

1) Choose A Wrong Broker

2) Pursue Fast Profits

3) Use High Leverage

4) Put Too Much at Risk

5) Lack of Patience

10 Important Tips Before Forex Trading

1) Select the Right Broker

2) Keep Learning

3) Set A Realistic Trading Goal

4) Use a Demo Account First

5) Begin with Small Sum

6) Take Risk Management

7) Trade with A Stop-Loss

8) Avoid to Use Too Much Indicator

9) Keep a Printed Record

10) Control Your Emotions

Conclusion

A Brief Introduction

This article highlights some common mistakes that investors most likely make when trading forex, followed by 10 tips based on these mistakes to help investors. Considering that forex trading is already a risky undertaking, these tips are only intended to serve as a guide to assist you in smoothing out your trading process.

5 Common Mistakes Forex Traders Make

Listed below are five mistakes most forex traders make during their trading activity, or some factors that contribute to their failure:

1) Choose A Wrong Broker

Finding a reputable and strictly regulated forex broker is the first step in forex trading. Since there is an increasing number of forex scams popping up that pose as legitimate brokerages, many investors lack the ability to distinguish which forex broker is a reliable one. This results in many traders being defrauded by scams, having their funds stolen from them.

We strongly recommend that investors make use of WikiFX, a global forex brokerage regulatory inquiry tool, which has more than 37,000 brokers enlisted, making it easier for you to find a reliable, regulated forex brokerage and avoid scams.

2) Pursue Fast Profits

Traders who are just starting out in forex trading sometimes mistakenly believe it is a simple way to become wealthy in a short amount of time. Trying to make a large profit by placing a large number of trades in proportion to your account balance will not be successful in the long run as eventually trades will go against you, which can result in significant losses.

3) Use High Leverage

Trading on margin, or leveraged trading, is one aspect of the forex market that attracts many traders. Even with a small initial deposit, it is still possible for you to open relatively large positions. Therefore, many investors mistakenly use too high leverage as they assume that this is an excellent opportunity to magnify their profits.

However, leverage can amplify both your gains and losses, which means it can work for you as well as against you. Traders who use too much leverage, especially inexperienced ones, may suffer a trading disaster.

4) Put Too Much at Risk

Traders in the forex market often dream of making large fortunes, so they put more at risk than they can afford, which leaves them vulnerable. However, please remember that a trader should never risk more than 1% of his or her capital on a single transaction. In other words, if the stop-loss order results in a loss of more than 1% of trading capital, it closes out the trade.

It is advisable to set a percentage for the amount you are willing to lose per day. If you can bear a loss of 3% in a day, it is best to discipline yourself to stop at that point.

5) Lack of Patience

In forex trading, many traders make the mistake of losing their patience very easily. Those who are thirsty for success and hate loss, lose money once and their confidence and patience are shattered.

A significant amount of progress will not be made immediately since this is a long journey towards market mastery. Take your time, be patient, and make your move when the timing is right.

10 Important Tips Before Your Forex Trading

To help traders gain a better understanding of the forex market, develop their own trading plans and goals, the following important 10 tips are presented to them before trading:

1) Select the Right Broker

Take your time when selecting a Forex broker. Do not settle for the first one you come across online at random. Consider your trading style and research different brokers, read their reviews to determine which one is the right fit for you. When choosing a broker, you should consider many factors, such as trading instruments, competitive spreads, a reliable trading platform, client funds safety, and professional and dedicated customer support.

In addition to these factors, it is especially critical to select a broker who is licensed and regulated by some influential and reputable regulatory authorities.

WikiFX provides an easy way for you to check a broker's regulatory status with just a few clicks, a user-friendly application that lists both regulated brokers with high ratings and fraud brokerages.

As a reference, here is a detailed explanation of what WikiFX is and how it works:

2) Keep Learning

Investing time in learning about the Forex market and how to trade it is essential if you wish to become a successful Forex trader. Hence, our next Forex trading tip is to ensure that you thoroughly educate yourself about the art of trading.

It is true that studying takes time and effort, however, you will undoubtedly reap the benefits in your trading. The learning process never ends. Regardless of your level of experience as a trader, there is always something new to learn. Make sure you keep up with the news, analyze market trends, and remain focused on the fundamentals.

3) Set A Realistic Trading Goal

Any journey should be preceded by an understanding of your destination and how you intend to reach it. Thus, it is crucial to have clear objectives in mind, and then ensure that your trading method is capable of achieving them.

Have you ever seen a claim about a forex strategy or system that supposedly makes $100, $200 or even $1,000 per day in the markets？ In fact, it is absurd when you take a step back and think about it. In essence, absolute returns are meaningless if you do not take into account risk first. By setting unrealistic trading goals, you are simply putting yourself at risk of failure.

4) Use a Demo Account First

Many new and novice traders fail to educate themselves and become hurt as a result, both financially and emotionally. Beginners should remember to learn at their own pace and to begin with the basics. Before considering trading strategies and analysis, it is recommended that you learn the terminology and understand how the financial markets operate.

A good way to get started with learning is to open a practice or demo account with a reputable online trading platform. Almost all forex brokers offer demo trading accounts as an option for traders to test their platforms. Traders can experience a real trading environment and place real trades with virtual money.

5) Begin with Small Sum

Forex trading is best done with a small amount of capital as a starting point. It is not a hard rule that opening a larger account can bring you greater profits. It would be ideal if you could increase the size of your account through your trading choices. Otherwise, it does not make sense to continue pumping money into an account that is burning cash at the rate of a furnace.

6) Take Risk Management

An important aspect of becoming a successful Forex trader is good risk management. Risk management involves identifying the risks associated with Forex trading and taking steps to limit your exposure to them. For forex traders, especially beginners, the key point to keep in mind is to risk only a small percentage of their overall capital on a single trade, just like a legendary forex broker once said:

Dont focus on making money, focus on protecting what you have.

-Paul Tudor Jones

7) Trade with A Stop-Loss

In forex trading, a stop loss is the order that closes out your position if the price of the trade moves in the opposite direction by a predetermined amount, which means that if the price moves against your entry points, your positions will be closed at market price. When you trade forex, this helps protect you from operating in a negative position that exceeds your comfort level.

Also, beginners without experience can use it to predict their trades accurately, saving time and money.

8) Avoid to Use Too Much Indicator

When you become a forex trader, you soon realize that the use of indicators in trading can be counterproductive. Profitable traders will tell you that the best indicator is price, and that all other indicators on your price chart are derivatives of price. There is no need to complicate trading. You will be well ahead of 90% of forex traders if you can read price action and understand supply and demand imbalances.

It is recommended that you use no more than one or two indicators on the charts if you are one of the traders who must have their favorite indicators displayed on the charts. Having more than two trading indicators on your chart can actually distract you from the trading process.

9) Keep a Printed Record

Keeping a printed record is essential for smoothing your forex trading curve. It would be a good idea to print out the chart and take notes of what your thoughts were at the time you initiated the trade, as well as where you entered and exited the trade. Also, take note of any other pertinent information. Through this process, you will be able to better understand your thought processes, and thereby become your own trading coach.

10) Control Your Emotions

You should maintain a sense of calm when trading, especially if you are experiencing high levels of stress. Make sure that you are making informed, rational, and unemotional decisions with a clear head.

You can reduce your stress levels by identifying the source of your stress and either removing it or reducing its impact on you. Even though this is easier said than done, especially after a period of losses, it has proved to be very important to a successful trading.

Conclusion

In summary, forex success is the result of a combination of preparation and tenacity, coupled with consistent discipline. As a starting point, these forex tips should serve as a guideline from which you can create your own assumptions about the forex market, incorporate a trading plan that works for you, and the rest is up to you.