Some important trading tips for Forex beginners..
FOREX TIPS FOR BEGINNERS
1. Define your Trading Style according to your Time Frame
First of all a trader must choose his trading style. Trading styles are formed according to a wide number of parameters. There are 4 questions that every trader should answer before commence trading Forex:
i) How much money can you invest?
ii) How much money can you afford to loose?
iii) What are your targeted annual returns?
iv) What is your time frame?
After answering these 4 questions you will be able to determine what kind of trading style is suitable to your particular profile. Each trading style corresponds to a particular time frame and thus we may categorize trading styles as follows:
a) Day-Traders, time frame intraday
b) Common Traders, time frame a couple of days / a couple of weeks
c) Long-Traders, time frame a couple of weeks / several months
2. Choose the right Forex Broker
Choosing the right Forex broker can make the difference between win and loose in Forex trading. There are tens of parameters that define which Forex broker suits you best. Here are the most important factors categorized in 4 general categories:
a) Safety of your Funds
-Forex broker regulation level
-Forex broker headquarters
-Forex broker existence in the market (in years)
b) Cost of Trading
-Magnitude of Trading Spreads
-The Existence of Trading Commissions
-The existence of Withdrawal or Maintenance Fees
-The existence of a Trading Bonus or of a Trading Rebate
c) Trading Options
-The allowance of Hedging / Scalping »What is Fx Scalping?
-The maximum rate of leverage
-Deposit and Withdrawal Methods
d) The level of Technology used
-Automated Trading (Expert Advisors)
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3. General Tips for Forex Beginners
3.1 Take advantage and use a Demo Trading Account before you open a Real Trading Account
Opening and using a demo account means you buy experience for free. Meanwhile you may test many aspects of your Forex Broker’s trading efficiency. It costs nothing and it is very easy to do it. Finally a demo account can be used also as a measuring tool of your performance.
3.2 Focus only in a couple of Currency Pairs not in many Currency Pairs
If you focus on a wide range of trading currencies you will not be able to get specialized and learn the little trading secrets that can make the difference in the long-run. From the other hand, if you focus on a couple of Forex currencies you will improve dramatically your level of information and finally increase the potential of generating Forex trading profits.
3.3 Focus on Popular Forex Pairs (Majors)
Focusing on majors and especially on EUR/USD and on GBP/USD means that you will trade at the lowest spreads and that you are provided with the optimal level of information. A lot of people are trading these 2 Forex pairs and that creates enormous liquidity. Liquidity force trading spreads to get smaller and that is why the same Forex Broker may offer the EUR/USD with a spread of 1 pip while he may offer another minor pair with a spread of 10 pips.
3.4 Control your Trading Activity
Start trading Forex for a beginner means swimming in unknown waters. If you are a Forex beginner it is better not to trade hard until you get familiar with the rules of the game. Again by using a demo account you can test your performance and learn the rules of the Forex Trading Game for free.
3.5 Use always a Stop-Loss Order (your trading shield)
A stop loss order is able to control and to reduce your overall trading risk. Keep in mind that every advanced trader that respects himself uses always stop-loss orders. A stop-loss order operates like a shield that protects your portfolio against market risk. You can also move your stop-loss order at any time, here is an example:
-You start trading EUR/USD at 1.2000 and place a take profit at 1.2080 and a stop loss at 1.1980.
-After two day EUR/USD is at 1.2040
-Now you can change your stop loss order to 1.2020 in a way that you will have ensured a 20 pip profit (1.2020 – 1.2000).
Forex Tips for Beginners