Every trader, in any market, comes across tips which can help them trade better, make greater profits and reduce risks, but knowing which tips to pay heed to and which are better ignored is not always easy. We’ve gathered for you ten tips you are sure to benefit from.
1. Know the Market and Yourself
There are two things you must be well acquainted with in order to become a successful trader, these are the ins and outs of the market you’re trading in and your own characteristics as a trader. You can learn a lot about a market by reading material online, following developments over time as well as by opening demo accounts and trying out your trading skills. Getting to know your trading preferences is also a process, you must be able to tell the level of risk you feel comfortable with, the trading tools which best suit you, your trading habits, your goals etc.
Educating yourself thoroughly about the market you’re trading in and taking the time to carefully analyze what characterizes you as a trader will allow you to make decisions you feel sure about, you will thus be able to gain experience and constantly improve your trading skills.
2. Choose a Reliable Online Brokerage
For the novice trader it may not be easy to distinguish between a truly reliable online brokerage and one that only seems to be based on the appearance and the content of its website. It is essential that you choose your online brokerage very carefully, take time to look for reviews, make sure it’s a well established brokerage with a proven track record. Compare the relevant services brokerages are offering, how good their support is, what is their trading platform like? How many traders have chosen to trade with them? Do they cater to your particular needs? Do not settle for anything but the most reliable online brokerage which is best suited to provide you with the trading services you require.
3. Pick the Right Account Type and Leverage Ratio
Once you’ve identified an excellent online brokerage comes the time to choose between the different account types they offer. If you discover that there isn’t one which feels right to you, it’s best to pick another reliable brokerage which does.
Leading online brokerages offer different account types so that they may best cater to the varying needs of traders. Obviously, the needs of a well seasoned professional trader are quite different than those of a novice, low profile trader who’s yet to decide whether or not they will continue trading and at what scale.
So far as leverage ratios go it is important to choose an account which will allow you enough leverage in order to generate the kind of profits you’re after, it is equally important not to “overshoot” since greater leverage also means higher risk.
4. To Begin With, Restrict Yourself to Focusing on a Single Currency Pair
The forex market may seem hectic to the novice trader, there are over 180 currencies in the world, there are numerous popular currency pairs and there’s a lot to learn about each one. It is highly advisable to restrict yourself in the beginning to trade on one certain currency pair, the USD:EU pair for instance. Doing this will allow you to get to know the two currencies involved intimately and thus make informed decisions. It may be that the potential for profit will not be as great as you may hope for but it’s important not to shoot blindly as this could cause you to remain without enough capital to continue trading.
5. Make Informed Decisions Not Ones Based on Gut Instinct or Emotion
It is not uncommon for traders to feel excited, euphoric or fearful and downhearted, it is important not to let such feelings get in the way of trading responsibly, including risk management and learning all there is to know about a trade you consider making. Successful traders may experience the same feelings you do but they know it is best to ignore them and continue making level headed decisions, giving orders to buy or sell accordingly even if their gut instinct is telling them otherwise.
6. Take Advantage of Automated Trading
Automated trading is a great way to help you keep your emotions in check. You may choose to use automated trading services (based on high probability predictions derived from complex trading algorithms and a vast body of market statistics data). Alternatively, you may still give the orders yourself but do so while checking to see if they correlate with moves automated trading tools are making (forex robots for instance).
7. Think Twice Before Trading Against the Market
It is true that traders who have enough foresight (allowing them to predict shifts in long term market trends) stand to make large profits by trading against the market. However, until you’re sure that you have the skill and experience necessary to make such long term predictions it is highly advisable that you refrain from trading against the market. An important thing to remember, regarding trading against the market, is that it may take a long time before you can sell at a profit.
8. Manage Your Capital Well
Successful traders are not only those who make many profitable trades but also know how to manage the funds at their disposal in a way which allows them to maximize profits and minimize losses. You must remember that you will lose money in some trades you make, if you allow yourself to lose too much of your capital you will find it hard to bounce back. It is therefore essential that you practice some sort of risk management strategy.
9. Make a Plan
Like many things in life successful trading requires making a well thought out plan. Its best to make a long term plan and then go on to break it up into short term segments. For instance, you may plan to trade on the USD:EU currency pair until you’ve doubled your capital and then go on to add two more currency pairs to trade on. In order for this long term plan to work you will need to take advantage of the time you spend trading on the USD:EU pair to learn about currency pairs you may decide to begin trading on in the future.
10. Stay In the Game
Some novice traders get cold feet once they realize that losing money is a real possibility. If you think you’re going to make nothing but profitable trades there’s no point in beginning to trade at all. Even the most successful traders make trades which cause them to lose money, it is important to learn from mistakes and stay in the game so that you too will begin to see constant, long term profits.