Forex trading has always been the biggest among existing financial markets and still is. The total volume of trade in forex markets throughout the world exceeds the total volume of trade of all other financial markets put together. Moreover, the marriage of information technology with forex trade has allowed the man on the street to tinker with and dabble in forex trading which once used to be the exclusive preserve of banks, merchant bankers, big time investors and speculators, and government agencies.
But forex trade is a vast realm and one needs to amass substantial expertise and experience to start trading successfully. Rushing headlong into the warzone without having the required arsenal is akin to committing professional hara-kiri. Therefore, you need to go in for a refresher course before you can start dabbling with the charts and currency pairs. Some guidelines have been provided below for you to follow and minimize your pitfalls and maximize your returns.
1. Learn to assess your priorities vis-ŗ-vis forex trade: - First of all, you need to decide whether youíre going to take up forex trading as a full time profession or career that will also be your prime source of sustenance or you just want to take it up as an ancillary means of making money. If it is the first case, then you need to take up a full time course before you start trading.
You also need to very carefully analyze your threshold level for risk taking. You also need to allocate your resources in a manner that gives you the optimum leverage on your spread. If it is the 2nd case, then you can take to it in a more easygoing way which of course does not mean that you should throw caution to the winds.
2. Have a plan ready in advance: - This flows from the first tip. Always plan in advance and prioritize your needs. Find out how much time you can devote and whether youíre looking up to it as your main source of livelihood or just an extra source of income. Set your priorities straight.
4. Go for a mini account with a low leverage and spread: - If youíre testing the waters, go for the minimum account size with a very low leverage so that initially you can concentrate on honing your trading skills. Take a conservative stance in the first few months.
5. Start trading with a single currency pair and choose a single timeframe:- Most beginners are tempted to trade with several currency pairs in the beginning as they have the impression spreading out will bringing in the expected rewards. While it is true that you should not put all your eggs in one basket it is also true that without enough proficiency and skills, you wonít be able to make all your eggs hatch. Start with an indirect currency pair whose base currency is your native currency.
6. Go by your instincts and act accordingly: - Do not go into the deep without knowing what youíll encounter. Do not get spurred on by rumors and weigh the possible consequences of your trading position in advance.
7. Trade with your head and not with your heart: - Being emotional in any form of business has never done any good and the same holds in forex trade as well.
8. Let your account burgeon from trading profits: - If you have to keep your trading account on perpetual life-support, then there is no point in trading in the first place.
9. Keep your trading program simple and straight: -Do not make things difficult and complicated for yourself by overemphasizing details. Do not make your trading position nebulous by cluttering your profile with charts, incomprehensible articles and forex tools that you cannot manage. Keep everything simple and straight with a crystal clear vision.
10. Be tenacious and perseverant: - You should be mentally prepared to lose in the initial phase so you need to be tenacious and perseverant enough.