Quintessential Tips for Forex Trading Strategies
Many beginners fail at Forex trading. They lose money, time, and they spend a lot of efforts on strategies that do not work. Eventually, discouraged, they stop trading – which is a pity, since anybody can succeed, with careful preparation and enough information.
The first and most important aspect, before you start trading, is to determine how much money you can invest. In other words, think how much you can afford to lose, without putting an additional strain on your finances. It’s always good to take the worst case scenario, just to be prepared in case things go wrong. The easiest way to do this is to put aside a bit of cash every month, just put it in a separate account, or use the old fashion method of storing cash in your closet. If you don’t need to spend it by the next paycheck, it means it’s money that you can use for Forex trading. Start small, with 5% of your income, and see if you can add more in time.
Now, it’s time to choose your currency. You can never do enough research into this matter, though, at some point, you’ll have to stop and make a decision. Make a list of reliable sources, and read the analyses provided by reputable traders and market researchers. By any means, do not rush into a decision, until you’re fully satisfied with what you know.
When you create your strategy, establish not only when you want to invest, but also when you want to cash out. Make sure you stick to this initial strategy, even if, when it’s exit time, you may be tempted to stay a little longer, because the market seems to grow. Acting on impulse is one of the biggest mistakes newbies make on the Forex market. Once you drew your strategy, follow it through without deviations.
Occasionally, it’s better to withdraw with a little loss, than to wait until the market goes completely downhill. Be prepared for such a situation, and learn to appreciate the investments that break even – they are a sign that you’re learning the ropes.
Never cease to research the market. Trading is not gambling, you don’t simply throw your money out there and hope that your number, or, in this case, your currency, comes out as winner. This can be puzzling at first, but you’ll be able to navigate your way among all the terminology and trends in no time. Think of it as learning the rules and the teams involved in a sport you have never heard of before: initially you don’t understand what all the team players are doing, how points are scored and how the winner is decided. After watching for a while, you begin to learn the rules, and, after a few seasons, you know the main players by heart, and you have quite a good idea of which teams stand a chance to win the championship.
Finally, once your investments start making a profit, make it a habit to withdraw some of it regularly. This is another mistake newbies make – tempted by the possibility of higher profit, they keep all their money in, risking considerable losses. You don’t want to withdraw the whole amount, of course, so establish a percentage of the profits that will go to re-investments, and take the rest out.