Tips can be a good replacement for long education articles. They are simpler to digest and don’t require an understanding of the jargon that can get in the way. When I speak with new beginner traders, I offer seven tips to put some structure around their trading setup. These trading tips and tricks could probably fit just about everyone who feels the stress of trading, the confusion of all the data, and the should help you become a more organized and better trader.
Forex trading has become very popular in Australia, and a lot of this hype is generated because people realize how easy it is to start trading, and how profitable it can be. But just because Forex trading is possible and has ASIC regulated brokers, it doesn’t mean it’s easy. If you keep believing it is easy, you will not be successful.
Tip #1: You Must Have a Trading plan
You need to have a solid trading plan and a good trading routine if you want to succeed. If you have been trading for a while still don’t get the right trading performance maybe it’s because you’re not following a rigid trading plan and need to follow these steps to develop one.
Trading based on intuition, without the foundation of a solid trading plan, is the recipe for disaster. You have to look at Forex trading like running a business. Every successful trader has a well-thought-out trading plan with a solid structure that can guide them through the day-to-day fluctuations in the market. Having a trading plan will help you eliminate a lot of the emotions beginners bring to trading which reaps havoc in times when you should be calm.
Tip #2: Protect Your Capital
Never risk more than you can afford to lose. You have to play defensively with the market and not risk more than 2% of your trading capital. Warren Buffett summed up this trading tip well: “Rule No.1 never lose money. Rule No.2 never forget rule number one.”
Tip #3: Use Technology to Your Advantage
In a fast-moving environment, like the FX Market, full of fast movements and decision making, a trader needs to use the best tools to make the job as a trader more effective. Trading is not an easy business and that is precisely why using tools that help with the math behind the money management strategy can benefit you.
If you are a technical trader, you should use technical tools for pattern recognition to help you faster identify your favorite price patterns, while if you are a fundamental trader you should be keeping a close eye on market news feeds and event calendars to plan your day.
Tip #4: Use Stop Loss
You should develop a good habit of using stop loss orders so you can protect your capital. This way you’ll be better prepared and can handle the losing trades much easier because you know the amount you could potentially lose on each position before entering the trade.
This should help you past those moments when, due to the speed of the market, your brain enters paralysis mode and you become indecisive and can’t take action. In moments like these, the stop loss order will work to your benefit.
Tip #5: Keep it Simple
Having a simple and clear strategy will help ensure you get the most positive experience and better results from your trading. Relying on too many indicators can be detrimental to your effectiveness and can severely hinder your ability to make money. Simplicity does not mean just limiting yourself to specific indicator types but extends to the number of pairs that you trade and the markets that you monitor. Start small, and once you master the small enclave you choose to trade in, then start looking for other smart opportunities to expand into. This staggered approach will make your trading career a more straight and easy process.
Tip #6: Choose Your Broker Carefully
In Forex trading you need the right partner to trade with. When choosing your Forex broker you have to see your broker as your partner and make sure you choose one that is reliable, offers the best trading conditions, and one that really fits all your trading needs.
Minimum requirement: The broker you’re doing business with needs to be regulated and have the proper licenses from major regulatory bodies. This is one way to be safe in your trading and to make sure your funds won’t be stolen or lost in a bankruptcy.
Tip #7: Be Patient
The fabled dream of a get rich quick scheme often is the main reason why people choose Forex trading. Forex trading is not a get rich quick scheme. Forex trading is more often quite the opposite of a get rich scheme, and in order to do well, you need patience and discipline. Success in this business is often achieved after a long period of time, so don’t look for the easy path because achieving success will never happening immediately.
Having the discipline to follow these tips on a day-to-day basis can make the difference between earning and losing. If you’re just starting your trading career the best thing you can do is just take it slow, try to follow these tips and warnings, and with time you could become a successful forex trader.