Trading forex is not for the faint of heart. Often seen as an unpredictable market, its potential profitability is offset by its dangerous risks, and it can prove too unwieldy for those unable to stomach the thought of losses.
For those with a little more derring-do, however, it can be the ideal investment instrument. Offering the potential to earn dazzling amounts of money, it is fast-paced, thrilling, and will keep you on the edge of your seat.
To many, its true beauty lies in its complexity. Forex trading is not a game of luck, but one of skill, and it is infinitely possible to tip the scales of fortune in your favour. Although it takes time, effort, and talent to do so, it rewards the masters of its art with often staggering profits.
If you’d like to give it a go yourself, then here are 10 tips to tip the scales…
#1: Don’t… Choose Your Broker Based on their Prices Alone
When it comes to choosing a forex broker, many will assume that the most economical option will be the best one for them. After all, it’s true that every penny you spend eats into your overall profits, so keeping costs low seems like an eminently sensible idea. What this fails to account for is the range of support and skill that different brokers will offer you. Thus, although prices should play a part in determining your final decision, it’s important not to prioritise them at the detriment of the service you’ll be receiving.
#2: Do… Take the Time to Research Your Broker
As we mentioned above, cost is not everything when it comes to choosing a broker, and reputation, record, and service must all be taken into account as well. Companies like ETX Capital score particularly highly against these criteria, but you’ll also need to consider the package that you’re shopping for, and whether it’s an execution-only, advisory, or discretionary broker that you’re seeking. Take your time availability, experience, and budget into account when making this decision to ensure that it’s the right choice for you.
#3: Don’t… Forget to Test Your Trading Strategy
Before you start trading, there is one very important step that you don’t want to miss: trying out your trading strategy. Even without placing any money on your decisions, you can track how certain scenarios would pan out, and see whether you would have made a profit if you had implemented your methods. Keep each of these imaginary moves written down, along with notes on their outcomes, and use them to work out a success rate. Until this rises to a percentage that you’re happy with, work on refining and improving your tactics, so that when you do start to trade, you’ll be giving yourself the best possible chance of success.
#4: Do… Remember to Demo Your Trading Platform
Choosing a trading platform is not something to be taken lightly. This software will act as your conduit to the currency markets, so it’s important to choose an option that fully complements your methods and strategies. The best way to ascertain this is through demoing accounts, and most brokers will be happy to offer such a service. Keep going until you find your perfect fit to help stack the odds in your favour.
#5: Don’t… Trade Reactively
One of the greatest mistakes that a trader can make is to trade reactively, so you’ll need to school yourself to resist the urge. There is no room for emotion in the forex arena, and all that it will do is hamper your decision-making abilities. If you find that everything is going wrong and you can’t think clearly, call it a day, walk away, and approach the situation with a fresh head in the morning to see whether you can repair the damage that’s been done.
#6: Do… Make Informed Decisions
Trading reactively is a big no-no in the world of the foreign exchange, and every decision that you make should be properly informed and logically reasoned. To achieve this, you’ll need to put the work into finding data and information to help you. It is this, as opposed to any gut feelings, that should drive your choices, and it is this that will ultimately help to secure your success.
#7: Don’t… Forget These Great Resources
The data that forex traders receive from their brokers is invaluable to informing their decisions, but it need not be used in isolation. There are thousands of resources for the erstwhile investor to take advantage of, from books to help refine your strategy to blog posts, YouTube tutorials, newspaper articles, and economic calendars. Each of them will offer a unique insight into the markets and how to approach them, and each one could prove instrumental to your success if you take the time to fully explore their offerings.
#8: Do… Diversify Your Trading Portfolio
Forex trading is a high risk endeavour, and as is the case with any volatile investment, diversification is an important tool when it comes to balancing your portfolio. Whether you choose to invest in multiple currency combinations, or consider adding other, more stable investment instruments to your interests, it will significantly lessen the impact of any catastrophes on your account, meaning that it’s a tactic well worth your consideration.
#9: Don’t… Trade More Than You Can Afford to Lose
It sounds obvious, but in the heat of the moment, you’d be surprised by how many traders let things get out of hand. The aim of forex is to make a profit, and if you allow yourself to sustain an irrecoverable loss, then your game will be over in an instant. Trade wisely, use precautions, and make sure that you protect yourself.
#10: Do… Use Stop Loss Orders
With the above in mind, you’ll find that stop loss orders are your best friend. Created for the sole purpose of limiting devastation, they can be used to place a cap on how low you’ll allow an investment to fall before closing a deal. Learn about them, use them, and take full advantage of their near-mythical properties.
Trade with these 10 top tips in mind, and forex success is yours for the taking.