Forex Trading Tips: With nearly $4 trillion worth of currencies traded on a daily basis, the Forex market is the largest financial market in the world. Being that it allows for both the traders and investors to build up profits rapidly, it remains one of the most exciting industries to be involved in.
However, for those new to Forex, it is crucial to know exactly what you are getting involved in. You shouldn’t be trading in the Forex market if you have no clue as to what trading in the Forex market entails. Many novice traders will read these words as many have before them, and they will go into the market and make serious trading mistakes. The problem becomes much worse when they continue repeating the same mistakes, over and over again. Some of the common errors that are committed include:
Not developing the correct strategy for trading in the Forex market.
Not having the correct trading mindset
Not understanding the fundamental differences between currencies.
Poorly managing trading funds, as well as poor implementation of trading strategy.
Many novice traders fail to appreciate the importance of having the correct outlook toward trading in the Forex market. This has mostly to do with preparation before beginning to trade in the Forex market. First and foremost, a beginning trader must bring together his personal trading goals and his trading mindset, so that he may understand the tools used in Forex and how they apply to his style of trading.
For example, the Forex trader needs to consider what trading time frame he is most comfortable with when it comes to trading. By using short time frame charts, like a 5 minute chart, you are implying that your comfort is with daily market positions and not with risking overnight exposure. On the other hand, if your trading is primarily made based on weekly charts, the implication is that you are willing to accept the risk of overnight exposure. Furthermore, it would mean that you accept the fact you will not be closing your position for several days.
The Right Attitude:
The right attitude would mean possessing the following traits in one’s mindset:
- Having realistic expectations
The ability to differentiate the significance between currencies:
Not all currency pairs are created equal. Each currency pair has a different fundamental reason for being traded. At the same time, the numerous market participants have their own individual attractions to different currency pairs. The way a hedge fund will trade differs significantly from the way a bank conducts its business. The trading philosophy of a speculator is very likely to differ from that of retail Forex traders. Thus, in order to capitalize on any opportunities that may arise, you must to be able to appreciate the different motivations of the various market participants.
Proper management and strategy implementation:
Although no Forex trading strategy is 100% foolproof, this does not mean you can forgo having one while trading in Forex. It still provides a roadmap for you to measure your progress in making your trading decisions. Even though some losses will be incurred along the way, at the very least, you can track the ratio of profits to losses when you utilize a particular trading strategy.
With an untold number of trading techniques and strategies available today, it is nearly impossible to say which is method is best and which need not be considered. It is important for you, as a trader, to establish a trading strategy that you feel comfortable with. As the Oracle of Omaha, Warren Buffet, use to say: there are only two rules in investment. The foremost rule is “Never lose money” while the second rule is “Always remember the first rule”.