iForexTrader

Understanding the basics of forex isn’t rocket science, but there’s more that goes into being successful, avoiding risk and maximizing returns than just the basics.

This article explores some concepts just beyond the fundamentals that will help new forex traders step up their game. In every case, the tips are accessible to those without much background knowledge, and can be implemented for use immediately.

Let’s explore some tips for forex beginners.

Choosing the right broker

This one isn’t just applicable to forex trading, but it’s among the most important things you’ll do when trading online. Different brokers have different strengthens and weaknesses. Some offer tighter spreads and lower transaction fees. Others have outstanding educational resources. Others have lucrative rewards programs.

You’ll want to prioritize transaction fees and spreads when creating your criteria for the right broker, but other characteristics will depend on your trading style. One of the biggest rookie mistakes is rushing to sign up with the first forex broker you find because you’re overeager to start trading.

Choosing the right forex trading platform

Beyond the broker itself, you’ll want to make sure the platform you use complements your trading style. For example, mobile enthusiasts will want something like the MT4. Desktop traders will want something that’s recognized to be of a high quality, like Intertrader.com’s award winning web platform.

Strategize

Having a plan and sticking to it is important for any trader. Watching the market swing back and forth can elicit strong emotional reactions, but keeping your actions logical is crucial. Determine your goals, understand how you’ll reach them, decide when to adapt and figure out how you’ll weather losses.

Start slow and build from there

Don’t put 50% of your account funds into your first trade. Beginning as a forex trader can be exciting, but it’s important to ease into things. Start with small trades to get a handle on the platform and the markets. Once you’ve made a handful of small ‘test’ trades, you can increase your stakes.

Use a demo platform

Some online forex brokers let you test the waters with a demo account. The purpose of these accounts is to let you try out their platform, but you can just as easily use them to develop your skills. Using fake currency to make forex trades will give you experience without exposing you to any financial risk. That’s invaluable for new forex traders.

Differentiating between major, minor and exotic forex pairs

Not all forex pairs are the same. Some are more volatile than others. Some are likely to have wider spreads than others. Some will be more familiar than others.

Keep in mind the differences between major, minor and exotic forex pairs when starting out. It’s not necessary to avoid one type outright, but it’s important to monitor your success for each pair to find your sweet spot.

Use a stop loss order

When a trade starts moving in the wrong direction it can be a difficult choice whether to abandon your position or hope for a comeback. Stop loss orders force you to stick to a premeditated strategy by automatically selling when you lose a certain amount. This limits the potential loss of any trade and is an invaluable tool for both pros and novices alike.

Use a profit target

A profit target is the opposite of a stop loss. It automatically ends a trade when a certain profit is obtained. This can prevent forex traders from holding their position too long and watching the market turn against them.

Don’t overdo it with the leverage

Leverage augments profit potential, but also risk. Leverage can make new traders starry-eyed, tempting them with a quick avenue to a big win. But risk aversion is important, especially for novices. Make sure you fully understand the investment you’re making when trading forex on margin.

Scale slowly

Beginner’s luck isn’t necessarily a thing, but anyone can make a few good investments by sheer chance. Even if you’re successful right away, don’t delude yourself into thinking you’ve cracked the market. No one has forex 100% figured out, and you’ll hit bumps in the road. Make sure you take a measured approach to investing to avoid losing your whole account with a couple rash investments.

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