These are some trading tips for Forex beginners..
FOREX TIPS FOR BEGINNERS
1. Define your Trading Style according to your Time Frame
First of all, you must choose a trading style according to your risk profile. There are 4 questions that every trader should answer before starting to trade Forex:
i) How much money can you invest?
ii) How much money can you afford to lose?
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, very high risk
b) Swing-Traders, time frame a couple of days to a couple of weeks, medium risk
c) Long-Traders, time frame a few months to several months, low-risk
2. Choose the right Forex Broker
Choosing the right Forex broker can make the difference between winning and losing in the long-run. 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
- Segregation of funds
- Forex broker headquarters
- Forex broker existence in the market (in years)
- Compensation scheme in case of insolvency
b) Cost of Trading
- Trading Spreads
- Trading Commissions
- Withdrawal or Maintenance Fees
- The existence of a Cash Bonus or of a Trading Rebate
c) Trading Options
- Asset Index
- Financial Instruments (Futures, Options, CFDs on Futures, etc.)
- Allowance of Hedging / Scalping »What is Fx Scalping?
- Deposit and Withdrawal Methods
d) The level of Technology used
- Trading platforms
- PAMM/MAM accounts
- Automated Trading (Expert Advisors)
- Mobile Traders
Using our Forex Broker Reviews in various partner sites you may find deep reviews and ratings regarding the world’s most popular Forex brokers.
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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 are buying an 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 for your performance.
3.2 Focus only on a couple of Forex Currency Pairs not in many
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. On 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, USDJPY, and 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 less than 1 pip while offering a minor pair with a spread of 10-15 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.
Occasionally, you can also move your stop-loss order higher to secure some of your profits, 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 days 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)
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Forex Tips for Beginners