Read on for 3 great tips to help you getting started in forex trading and well on your way to becoming a successful foreign exchange trader.
1) Before you enter a market, you need to know your market :
Think of the world of forex as a virtual casino. What’s the first thing you do upon entering a casino for the first time? You assess the behavior of each of the tables before placing a bet, so you have a good idea of what sorts of odds you are facing and become aware of any potential high-risk and high-loss games, as well as those with potential high-winnings to be had. It’s much the same with the foreign currency markets; some currencies are volatile while others ensure solid returns. You should study the forex market and get a feel for patterns and stay ahead of market activity by reading the financial news, keeping a wide-angle view of international news and their economic consequences on the currency market.
Pick a currency pair that suits your trading hours
Your success as a currency trader is of course dependent on skill and chance, but there are some choices you make that can heavily influence the tenor of your trading volume. If you know you are only available to trade during certain hours, perhaps because of other commitments such as a “day job” or childcare duties, select the currencies that are open during the hours of your trading session so that you are able to follow the movements of that pair as and when it happens, rather than relying purely on advanced trading and risky predictive strategies for currencies whose trading sessions will be open once you have stopped trading for the day.
Limit your exposure to risk
Apply effective stopping measures to control your risk exposure. By having a watchful eye and implementing practical risk limitation measures, you are doing the smartest thing a trader can do to protect profits and minimize loss. Two examples: Position Sizing; this is a strategy which varies trade sizes according to the current trend; and Stop Placement; this marries indicators to stop loss placement and uses the two in tandem.
Rick Silver is a Financial Writer and contributor to Everest Forex. She spent many years working at leading U.S. investment firms and banks, within the fields of foreign exchange, commodities, structured finance, asset finance and corporate finance.