The high returns of the forex market with a little investment makes it very attractive. The new forex traders can easily be identified whenever they are seen in the markets, performing their trades. Many of these traders must have taken exhaustive training sessions and seminars to polish their trading game. When trading is treated as a business, it can help you in harvesting huge rewards and benefits.
Just like any other business, there are some do’s and don’ts related to the forex trading. No seminars or training sessions can teach these critical pointers for successful trading. These can only be learned and understood with experience. Therefore, rather than making the mistakes and learning from your own experiences, it is always better to learn from the mistakes of others.
In this article, we have listed down some of the do’s and don’ts pertaining to the forex trading. These pointers will help you understand the dynamics of the market and some of the rookie mistakes made by new traders.
- You should always have a trading plan. Right planning is the stepping stone towards successful trading. For preparation, the trader should have a sound knowledge of the foreign exchange trade Lifecycle. This knowledge will help you in devising a comprehensive and profitable plan based on real data rather than instinct.
- Treating trade as a business, if you are willing to have a smooth start rather than a jittery one, you should keep the present money market scenario in your mind before conducting any trade. In order to understand the dynamics of the market, a forex trade-related research should be performed.
- A new trader should get into the game when the market is showing either a progressive ascend or descend. If a rookie starts his trading on any of the sudden movements of the market, it can seriously backfire. The investor might end up losing a considerable sum of money.
- The entry and exit strategy are of vital importance in forex trading. The investor should be well aware of the Fibonacci Analysis before conducting his trade. This analysis will help him in strategizing his entry and exit points. This will happen because the investor will be able to observe and forecast market fluctuations.
- When we talk about forex trading, technical and fundamental analysis go hand in hand. The investor should gain knowledge of the trading patterns of the market by using charts, continuous patterns, or trend reversal. This will help the investor in making his first move.
- Rather than using the actual money in the beginning, an investor should practice on a simulator. Working on the simulator can help the investor in making two specific decisions. Firstly, after trading on a simulator, the investor might not feel the same about forex trading and would want to opt out of it. Secondly, the investor might lose a huge sum of money on the simulator, finally concluding that forex trading is not his thing and therefore he should quit. In either case, actual money will not be involved so the investor won’t conclude the hard way.
- In the beginning, the traders can use intelligent trading robots which can help them in achieving success.
- Patience is the key. The trader should never make impulsive decisions. You will be setting unrealistic goals if you are expecting instant results. You should be in it for the long haul. Don’t enter into forex trading until and unless you can control your impulsive decision making and your tendency to rush things.
- If you are not aware of the market trend, you should never risk your capital. Forex trading is an art which can be learned gradually by any individual. Never make hasty decisions for profit making. On the contrary, remember that slow and steady wins the race.
- Don’t indulge in trades during off hours. Such an adventure can result in massive losses. Always conduct all your business and all your trading activities during the active market hours.
- Never put all your eggs in one basket. It will not be feasible for a rookie trader to invest all of his capital at the same time. Especially, when the trader doesn’t have a proper and comprehensive understanding of the money market. A slight fluctuation can result in him losing all his money. Always invest an adequate amount of capital to minimize the risk factor.
- When you are in forex trading, don’t ever be greedy. Don’t ever make any trade decision solely depending on the feel of the market. Trading is not done with emotions. Trading decisions are made based on sound market knowledge and predictions based on past trends.
- You should not enter in forex trading if the charts of the fundamental and technical analysis show an unstable or a downwards trend. Always make your decision after carefully observing and studying the analytical charts and patterns.
- Don’t panic. Trading doesn’t mean that you will always be making profits. It is business where losses are also incurred. Don’t let these losses blind sight you from your strategy, therefore still make your decisions based on market trends without panicking.
These do’s and don’ts of the forex trading will help you in realizing your mistakes that you might be making and will give you a proper direction. If you follow these do’s and don’t of trade religiously, you may end up making huge profits.