One of the most important challenges for new traders in the currency market is the lack of information about getting started in a particularly intractable market. And before even getting started we suggest reading Trade Horizon Review to see what are the common trading conditions in the Forex market.
Also, having a trading plan is essential for every trader, especially when it comes to taking a position in one of the most liquid markets in the world. We have gathered some important points below that you will need to consider before implementing your strategies.
Table of Contents
1. Start small
One of the usual mistakes made by novice traders is to jump straight into the deep end, but you shouldn’t initiate a trade until it has been well thought out. Once this step is done, start small – 1 € from the maximum point and gain confidence slowly but surely. Beginner’s luck is a myth in trading. When you first start out, you will suffer losses on some trades and profit on others.
That’s why it’s okay to make mistakes in the beginning, and you need to make sure that they don’t cost you too much. If you start with a position within € 10 of the point and the market moves against you by 25 points, you will suffer an immediate loss of € 250, not to mention the possible loss of confidence. This is a valuable lesson, especially when you think the market will not move directly in your favour upon opening the trade.
2. Choose your market/instrument
Research the market that interests you and decides if you are comfortable with the level of volatility associated with it. Do you want to make a short-term profit, or do you prefer to seek a gradual profit over time? If you are searching for short term gains, then you will probably be interested in fairly active and volatile markets showing a fairly large daily channel compared to the posted spread. A tight demand/supply spread also means reasonable liquidity, which is good if things go against you, with markets moving so quickly, giving you plenty of opportunities to close a position.
3. Define your goals
One of the most important rules is to trade in the trend: if the markets are bullish, place a buy trade and if they are bearish, place a sell trade. It is probably not a good idea to aim for the top or the bottom of the trend. If the market is bullish, decide where you want to buy and place your trade. The same applies if you are looking to sell. You should have a well-established money management strategy with well-established levels for your Stop Loss and Take Profit orders. Finally, you shouldn’t take a position just to do so. Being neutral or out of the markets can be considered a position in its own right.
4. Go for simplicity
It can be interesting not to opt for an overly complex analysis by multiplying the technical indicators, which can sometimes give you contradictory signals, pushing you towards wrong reasoning. The basic questions you should ask yourself are: a) Is there a trend? (Yes No) ; b) If there is a countertrend, do nothing. If there is an uptrend, look to buy and if there is a downtrend, look to sell; c) Look for areas of support and resistance. Then decide whether to take a position or not.
